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Bank Deposits In India
People generally want high returns on their investment. However they are not ready to take up the risks attached with the returns. In cases of mutual funds and share market, the returns are quite high but the risk associated with it is also very high. Not every person is ready to take such risks. For such people, there are some safe ways of investment. Depositing with banks is one way to have reasonable returns on your investment without a very high risk. The risks with bank deposits are minimal and thus it is ideal for investment and is preferred by a large number of people in India. The banks provide with various deposit schemes to meet different needs of the people. The most popular and common bank deposit accounts are:
- Current Deposit Account
- Savings Bank Account
- Recurring Deposit Account
- Fixed/Term Deposit Account
Current Deposit Account:
Though this account is not a saving account, yet it is very useful for business people. This account is for businessmen, companies and other institutions that have to make payments through their bank account. Such people have high number of transaction per day and need to make many payments. Savings account does not have such flexibility and thus, is not suitable for business purposes. This makes current account very feasible for business purposes. This type of account provides for unlimited number of transactions and the amount of transaction per day. This type of account would require a certain minimal deposit at the time of opening of the account; the minimal deposits vary from bank to bank. Also, no interest is paid on the deposit made in current account. However, one major benefit is that bank allows you to withdraw more money than in your account. This is called overdraft facility. This facility is available to certain clients up to certain limit of amount.
Savings Bank Account:
The most commonly adopted form of saving for an average man is a banks’ savings deposit. It is ideal for people with limited income who wants to save money for future. The account could be opened as individual or joint account. The bank gives interest on the deposits in savings account. The rates of interest are not very high and vary from bank to bank and from time to time. One can open a savings account with a minimum deposit, generally Rs. 100 to Rs. 500. Initial deposit varies from bank to bank. Money can be deposited at anytime in this account. However, there are restrictions relating the number of withdrawals per day. Generally a person can withdraw money using a withdrawal slip, or by issuing a cheque or through an ATM card. A minimum balance needs to be maintained in this account as prescribed by that bank.
Recurring Deposit Account:
For people who can save regularly, say every month and who wants to earn a higher interest than savings account shall go for a recurring deposit account. Under this account, a person needs to deposit a fix amount every month for a particular period of time. For example, if a person deposits Rs. 2000 every month for a period of 3 years, the entire amount along with the interest is payable at maturity, i.e. after 3 years. In case the person wants to close the account before maturity, he can do so. The amount and interest till that period shall be payable. This type of account could be opened by an individual person, or jointly with another. The guardian of a minor can open such account in the name of the minor. The interest received in this account is higher than savings account but less than fixed deposit account for the same time period.
Fixed Deposit Account:
This deposit is also known as term deposit account. When a person has a good amount to invest but does not wish to go for risky investments, he must choose fixed deposits with banks. Fixed deposits are best for long-term safe investments. Under this deposit, a person saves a certain sum of money for a fixed period of time to earn higher interest on such amount. Interest is calculated on a monthly, quarterly or yearly basis depending upon the scheme of that bank. The deposit is made for a fixed time period ranging from a minimum of 15 days to many years. No withdrawal is allowed during the tenure of the deposit. However, the person could encash the amount before maturity. In such case, the bank charges a penalty and gives lower interest than initially agreed. The interest received on fixed deposit could be withdrawn at certain intervals. At the time of maturity, the depositor can withdraw the amount or renew the account for another time period. Loans could also be availed against the security of fixed deposit. To attract more customers, various schemes with fixed deposit account are offered by banks. Some such schemes are fixed deposit with life insurance, health insurance, instant loan facility, free credit cards etc.
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