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What are the different types of banks and accounts available in India?

# Little Savings

This page will help both to the common people and amateur software professionals who want to understand the banking products and different types of accounts available in India.

How Banks will Survive?

  • Banks will help to save the depositor's money by paying the interest rate 4-6%, and that money will lend to the others and charge an interest of 8-20%.
  • Transfer your money between the payees.

Types of Banks:

  • Retail Banks - Retail banking, also known as consumer banking, is the provision of services by a bank to the general public, rather than to companies, corporations or other banks. Banking services which are regarded as retail include provision of savings and transactional accounts, mortgages, personal loans, debit cards, and credit cards.
  • Commercial Banks - Commercial bank can also refer to a bank or a division of a bank that mostly deals with deposits and loans from corporations or large businesses, as opposed to individual members of the public (retail banking).
  • Investments Banks - An investment bank is typically a private company that provides various finance-related and other services to individuals, corporations, and governments such as raising financial capital by underwriting or acting as the client's agent in the issuance of securities. An investment bank may also assist companies involved in mergers and acquisitions (M&A) and provide ancillary services such as market making, trading of derivatives and equity securities, and FICC services (fixed income instruments, currencies, and commodities).
  • Postal Banks - Postal savings systems provide depositors who do not have access to banks a safe and convenient method to save money. Many nations have operated banking systems involving post offices to promote saving money among the poor. ‘India Post’ will use its large network to run a payments bank.
  • Payments Banks - Payments banks is a new model of banks conceptualized by the Reserve Bank of India (RBI). These banks can accept a restricted deposit, which is currently limited to ?1 lakh per customer and may be increased further. These banks cannot issue loans and credit cards. Both current account and savings accounts can be operated by such banks. Payments banks can issue services like ATM cards, debit cards, net-banking and mobile-banking. Bharti Airtel set up India's first live payments bank.
  • Co-operative Banks - All Co operatives works with the principles of “one member, one vote” and “no profit, no loss”. They basically formed by the volunteer group of people with the object to meet their economic, social and cultural need through a jointly owned enterprise. but the Cooperatives Societies have limits to lend money to only its members for agriculture and other purposes in rural areas where cooperatives can give loan to non members and small businesses in both urban and rural areas.
  • Central Banks(RBI) - In each country there exists central bank which controls a country’s money supply and monetary policy. It acts as a bank to other banks, and a lender of last resort. India Reserve Bank of India (RBI) is the Central Bank.
  • National Bank for Agricultural and Rural Development (NABARD): This bank was established in 1982 in India in view of providing the rural credit to the farmers. Actually, it is an apex institution which co­-ordinates the functioning of different financial institutions working in the field of rural credit.
Banks list will not be limited, every bank has a purpose.

Non Banking Institutions:

  • Non-Banking Financial Company (NBFC) –
NBFCs lend and make investments and hence their activities are akin to that of banks; however there are a few differences as given below:
  1. NBFC cannot accept demand deposits;
  2. NBFCs do not form part of the payment and settlement system and cannot issue cheques drawn on itself;
  3. deposit insurance facility of Deposit Insurance and Credit Guarantee Corporation is not available to depositors of NBFCs, unlike in case of banks.
Although NBFCs are similar to banks, they do not perform all the financial activities conducted by banks, such as accepting demand draft and issuing cheques. However, NBFCs provide loans and advances, offer credit facility, and manage the portfolio of stocks. Eg: Bajaj Finersav

Types of Accounts:

  • Savings Account
  • Current Account
  • Credit Card Accounts
  • Deposit Accounts
  • Investments Accounts
  • Loans/Mortgages
  • Wallets & Wallet Savings Account
  • Digital Accounts
Difference between current account and savings account?

In India, all most all the individuals will have the savings account. Anyone can opt for a savings account. 

The current account will be opened by the business people for the frequent transactions and their immediate funds availability.

Difference between current and savings account? 

In savings account, the account holder keeps funds and available money used for the transactions. 

But the current account is like a loan, based on the business turnover the bank fix the cap value of the current account and will be available for funds transfer. When the user not withdrawn any amount, there will be no interest/charges. Suppose if the user withdraws an amount, the interest rate will be calculated for that withdrawn amount. While repaying the amount, user needs to pay the withdrawn amount + interest. If the user repays the whole amount or maintain the whole amount, there will be no charges. 

In current account, the transactions are frequent and funds available at any time and pays interest only to the withdrawn amount. Unlike loan, the user repays the whole amount withdrawn without any prepayment charges, but pays interest only. 

Recapping, Savings account for the individuals and Current account for the business men. No interest to be paid for withdrawals, charges incur on the withdrawal amount.

Banking Channels:

  • Branches
  • ATM - Debit Card
  • Phone Banking
  • Internet Banking
  • Mobile Banking
  • SMS Banking
  • USSD

Types of Transfers:

  • Within own accounts
  • Same Bank but different branch
  • Other Banks

Modes of Transfers:

  • Account Number & IFSC
    • NEFT
    • RTGS
  • Mobile Number & MMID
  • UPI via VPA
  • Cardless Cash Withdrawal
  • Social Payments(via FB, Whatsapp)
  • NFC Payments(Samsung Pay, Apple Pay)
  • UPI 2.0

New Modes of Transfer:

  • Voice Activated Services Eg. Alex

Cards:

  • Debit Cards
  • Credit Cards
  • Multi Currency Cards
  • Travel Cards

Bill/Merchant Payments:

  • Billers/Merchants Payments
  • Payment Gateway
  • Batch job
  • BBPS(Instant Pay)

Deposit Types:

  • Fixed Deposit
  • Recurring Deposit
  • Annuity Deposit
  • Auto Sweep Deposits
  • Flexi Deposits
  • Multi Option Deposits
Know more about the Deposit types,

Deposits are one of the most important and low risk tool for investments. The emerging of deposits is vast due to its compound interest. I personally suggest, SBI is one of the best bank to offer different fixed types. Firstly, lets have a glance on different types of deposits available in India.
  • Fixed Deposit - which provides investors a higher rate of interest than a regular savings account, until the given maturity date.
  • Recurring Deposit - Recurring Deposit is a special kind of Term Deposit offered by banks in India which help people with regular incomes to deposit a fixed amount every month into their. Recurring Deposit account and earn interest at the rate applicable to Fixed Deposits. It is similar to making FDs of a certain amount in monthly installments, for example ₹ 1000 every month. This deposit matures on a specific date in the future along with all the deposits made every month. Thus, Recurring Deposit schemes allow customers with an opportunity to build up their savings through regular monthly deposits of fixed sum over a fixed period of time. Minimum Period of RD is 6 months and maximum is 10 years.
  • Annuity Deposit - Under this scheme, a lump sum amount is deposited by a customer which is repaid to the customer over a period in equated monthly installment which comprises part of principle amount and interest on the reducing principle amount as well. Using the scheme customer can have fixed monthly amount against his one time deposit. Payment will start on anniversary date of the month. If date is non-existent (29th, 30th and 31st), it will be paid on 1st day of next month.
  • Auto Sweep Deposits - Auto Sweep is a facility which interlinks saving bank account with a Fixed Deposit account. In Auto Sweep account, amount in the bank above a limit is automatically transferred to Fixed deposits and earns a higher rate of interest.
  • Flexi Deposits - Unlike Recurring Deposit account, SBI Flexi Deposit offers flexibility in choosing the deposit amount within the minimum and maximum limits per financial year.
  • Multi Option Deposits - The MOD (Multi Option Deposit) account is a combination of your transactional (debit) account and deposit account. These are the Time Deposits but at the time of need for funds, withdrawals can be made in units of Rs.1,000/- from the deposits by issuing a cheque from Savings Bank Account or from ATM / branch or through any other channel. This kind of deposits is completely liquid. The sum of available balance in the transactional account and MOD balance can be used for issuing cheques or withdrawal or making any other payment.

Investments Accounts:

  • Demat Accounts
  • IPO
  • Buy/Sell Funds

NR Accounts – NRE & NRO:

  • NRE account is Non-Resident External Rupee account while NRO is Non-Resident Ordinary Rupee Account.
  • NRE is a bank account in which NRI's can deposit income generated from external sources and money transferred to an NRE account from any foreign currency is converted to INR. It permits an NRI to hold and maintain foreign currency earnings in INR.
  • NRO helps NRIs manage income earned in India such as rent, dividends, or pension from abroad. The account holder can deposit and manage accumulated rupee funds conveniently through an NRO account. Foreign currency deposited into the NRO account is converted into Indian Rupees..
  • So the major difference is that in NRE you can’t put your Indian earnings while in NRO you can put.
  • If you want to send money abroad from India, NRE account can be better choice than NRO account which impose a limit on how much amount you can transfer from India to abroad.

Rewards:

  • To encourage frequent usage of cards, the card companies introduced the concept of reward points.
  • These points could be redeemed for gifts, select product purchases and even for paying the annual fees. So every point would be equivalent to one rupee.

Funds:

Funds Type Invest in
Money Market Funds Short term fixed income securities – govt bonds, CD’s
Fixed Income Funds fixed rate of return like government bonds, investment-grade corporate bonds
Equity Funds Stocks - growth stocks, income funds, value stocks, large-cap stocks, mid-cap stocks, small-cap stocks
Balanced Funds mix of equities and fixed income securities.

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