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A savings bank account is your first step towards saving and investing. We learnt about it in the article 'Basics of savings bank account'. Let's now delve deeper into this type of account by studying its various types.
1) No frills/basic Savings
- This account is aimed at those who have limited cashflows.
- It allows you to bank with a zero balance.
- There is no stipulation on minimum or average balance.
- If the balance in a no-frills account exceeds Rs 50,000 or if the cumulative value of credit transactions exceeds Rs 1 lakh in any financial year, the account will no longer be treated as 'no frills'.
2) Salary account
- This account is offered by companies to their employees. Monthly salaries are credited directly to these accounts.
- The account comes with concessions on maintaining a minimum balance, number of withdrawals, additional cheque-book facility and other features, including a free ATM-cum-debit card, in most cases.
3) Sweep-in or multiplier account
- This account provides the liquidity of a savings account, coupled with high-interest earnings of a fixed deposit. This is achieved through a fixed-deposit account linked to a savings account.
- The balance in this account is never idle. A fixed deposit from the surplus funds in your savings bank account, subject to a minimum balance as stipulated by the bank, is created in multiples of sums stipulated by the bank for a tenure of one year or more.
- The account also provides maximum liquidity. All linked fixed deposits are enabled for automatic reverse sweep in multiples as stipulated by the particular bank on a last-in-first-out (LIFO) basis, when the balance in the savings account falls below the specified minimum sum. This way, the amount that is reversed earns interest at rates applicable for the period that the deposit was held with the bank.
4) Miscellaneous accounts
Banks have created other miscellaneous accounts to cater to different target groups by bundling features:
- Privilege banking: Offers additional services for a fee or on maintaining a higher minimum balance.
- Children's account: Meant for children. Children can operate this account based on the conditions pre-set by the parent or the guardian.
- Accounts for women: Targeted at women. These accounts have special features, such as privilege cards and special discounts.
- Senior-citizen account: Aimed at those above 60 years. The account offers access to special counters in the bank branch, besides additional interest on deposits and low or no minimum-balance maintenance requirements.
Where to open a Savings account
You can open an account at any nationalised, private-sector or foreign bank.
How to open a Savings account
Once you have selected the bank to open an account, you will need the following documents:
- An account-opening form, which the bank will provide.
- Two passport size photographs.
- Aadhaar card. In the absence of the same, you need to provide a copy of the acknowledgement of your Aadhaar application.
- Address and identity proof, such as the Aadhaar card; a copy of the passport; PAN (permanent account number) card or declaration in form no. 60 or 61 as per The Income-Tax Act, 1961; driving licence; voter's ID; or ration card.
Carry the original identity proof for verification at the time of account opening. These days, you can also open an account online without visiting the bank branch.
How to operate a Savings account
- You need to credit the initial account opening sum to your account.
- You get a savings-account passbook, with your photo affixed. However, some banks, especially private and foreign banks, do not issue a passbook. Instead, they deliver an account statement.
Types of transactions
- Cash, cheque, demand draft, money transfer and ECS.
PRADHAN MANTRI JAN DHAN ACCOUNT
The Pradhan Mantri Jan Dhan Account is a no-frills account meant to provide banking access to all, especially for the poor. It can be opened in any bank with zero balance. However, in order to get a cheque book, one has to fulfil the minimum- balance criterion.
Documents required
In order to open the Jan Dhan account, you need an Aadhaar card. In the absence of the same, you need to provide a copy of the acknowledgement of your Aadhaar application, along with an identity proof and address proof. The following documents can be used for these purposes: voter ID card, driving licence, PAN card, passport and NREGA card. In the absence of these, one can use an identity card issued by the central/state government departments, statutory/regulatory authorities, public-sector undertakings, scheduled commercial banks and public financial institutions. A letter issued by a gazetted officer with a duly attested photograph can also work.
Benefits
The Jan Dhan account has many features like a general account, such as interest payment on the deposit, money transfer and a debit card. Apart from these, here are some special benefits:
- Accidental-insurance cover of Rs 1 lakh (enhanced to Rs 2 lakh for new accounts opened after August 28, 2018).
- Life-insurance cover of Rs 30,000 (for accounts opened between August 15, 2014 and January 26, 2015).
- Overdraft facility of up to Rs 10,000 to eligible account holders.
- Direct-benefit money transfer to the beneficiaries of government subsidies.
This article was originally published on November 01, 2021, and last updated on July 14, 2022.
Disclaimer: This content is for information only and should not be considered investment advice or a recommendation.
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