12 types of bank accounts: features, benefits and functions

A bank account is a financial account maintained by a bank and financial institutions to keep a record of the financial transactions between the bank and the customer. A bank offers different types of bank account centered around serving needs of different consumers.

The features of a bank account include convenience, security, direct deposit, online and mobile Banking, and automatic bill payment. These features provide several benefits to an account holder.

A bank account benefits people in enhancing financial management and security include convenience through easy access to funds for transactions.

The function of bank accounts includes several essential functions that facilitate financial management and economic activity. 

Read on to learn about the types of bank accounts, their features, benefits, and functions.

What is a bank account?

A bank account is a financial arrangement between an individual or a business and a banking institution that facilitates the secure storage of money, easy access to funds, and their transactions. It acts as a main tool to manage personal finance, providing a mechanism to receive income and salaries, save money for future and make payment for purchase of goods and services.

Oxford Dictionary defines bank account as an arrangement made with a bank where a person deposits and withdraws money and earn interest on the money kept in the savings account or in a fixed deposit.

Wikipedia defines bank account as a financial account that is maintained by a bank and financial institutions to record financial transactions between the bank and the customer.

A bank account allows deposit, withdrawal and transfer of funds, payment services and interest on the money. Today, it is easy to open a bank account online without the need of visiting a bank branch. As per IBEF, the article titled “Banking Sector In India“ digital technology has taken the lead in ensuring that every single new bank account opened in rural parts of India is online.

What are the different types of Bank accounts?

The different types of bank accounts are offered by banks to cater to the different customer needs. In India, there are 12 types of bank accounts offered by banks that are listed below.

• Savings Account 
• Current Account 
• Fixed Deposit Account 
• Recurring Deposit Account 
• NRE & NRO Account 
• Senior citizen savings account 
• Joint Account 
• Demat Account 
• Salary Account 
• Corporate Account 
• Student Account 
• Minor’s Account 

1. Savings Account

Savings account is mainly a deposit account that pays interest on the deposited amount and allows you to withdraw money instantly in need.

As per Investopedia,  a savings account is a bank that pays interest on the amount kept in a savings account and provides easy access to money.

According to the Bankrate, “a savings account is basically a deposit account that earns interest and is insured by the government”.

Generally speaking, a savings account allows deposit of money safely with the bank, so you don’t need to carry or hide that in a safe at home.

What are the features of a Savings Account?

The features of a savings account include easy access to your money and the interest you get on keeping that money with the bank. The rate of interest paid on a savings account varies from bank to bank.

The primary features of a Savings bank account is listed below.

•  Liquidity
• Interest on the deposits
• Transfer money online

What is the amount of money required to be saved in a savings account?

There is no limited on the amount of money required to be saved in a savings account. However, as per article title “How much money can you deposit in a savings account in a year to stay outside the taxman’s radar” published on Financial Express, cash deposits and withdrawals of Rs 10 lakh or more in a bank account attracts Statement of Financial Reporting (SFT) reporting to the tax department in order to curb black money.

What is the minimum balance required in a savings account?

The minimum balance required in a savings account is zero, however, it differs from bank to bank. Some banks offer zero balance account whereas some banks need you to maintain minimum balance as per the account variant you are using.

According to The Economic Times, an article titled “Savings account minimum balance requirement: SBI vs PNB vs HDFC Bank vs Canara Bank vs ICICI Bank” written by Sneha Kulkarni, minimum balance limit differs with banks and depend on the location of the bank in a metro, semi-urban, or rural area.

What is the interest provided in a savings account?

The interest provided in the savings account in India varies from 2.60% per annum to 8% per annum and depends on the amount of savings in your account.

The State Bank of India provides an interest rate from 2.70% on a savings account whereas Fincare Small Savings bank offers the an interest rate up to 7.11% in India.

2. Current account 

A current account, sometimes called as a checking account or transaction account, is a type of bank account offered to individuals and businesses to deposit money, make withdrawals, and perform various financial transactions conveniently. A current account is offered to a professional or businesses to handle their daily money and financial transaction activities.

What are the features of the current account?

The features of current accounts are includes unlimited transactions, issuing cheque books, overdraft facility, online banking services and set-up of auto debits for regular payments.

What is the amount of money required to be kept in a current account?

The amount of money required to be kept in a current account is somewhere between ₹5,000 to ₹50,000 is required though this will change according to individual negotiations in some banks.

What is the minimum balance required in a current account?

The minimum balance required in a current account is INR 10,000. However, different bank offers different types of current account that require a Quarterly or Monthly Average Balance of INR 10,000 or more.

What is the interest provided in a current account?

No interest is provided in a current account, however, there is a sweep in and sweep out facility provided in current account to gain interest on excess money kept in a current account.

3. Fixed Deposit Account

A fixed deposit account is a type of account that offers a guaranteed interest rate on the sums deposited in a Fixed Deposit account, for a stipulated period or tenure. A fixed deposit offers higher rate of interest on funds.

What are the features of a fixed deposit account?

The features of a fixed deposit accounts are given below.

• Fixed deposits provide guaranteed returns.
• The person deposits money with a bank over a certain period, which earns interest until maturity and ensures that the deposits are paid back at the end of the agreed period. This means that clients cannot withdraw deposits until the maturity date or before a specified time limit due to penalty charges imposed by these organizations.
• In the fixed deposit, the bank provides Cumulative Interest. 

What is the amount of money required to be saved in a fixed deposit account?

The amount of money required to be saved in a fixed deposit account includes some having low opening limits of as low as ₹1,000, but others require higher minimum investments.

What is the minimum balance required in a fixed deposit account?

The minimum balance required in a fixed deposit account because all money deposited is locked up for an investment period of time you chosen.

What is the interest provided in a fixed deposit account?

The interest rate offered on a fixed deposit account differ on factors like term, deposit amount, and the provider of FD. Currently, the fixed deposit account earn about 4% to 7.5% annually depending upon the interest offered by a bank.

4. Recurring Deposit Account

A recurring deposit account is a kind of savings scheme where people keep depositing a certain amount of money regularly (generally every month) for a specified period of time.

What are the features of a Recurring Deposit Account?

The features of recurring deposit accounts are given below.

• Recurring deposits have a set term. The time frame for a recurring deposit typically lies between six months and ten years.
• Often, the profits earned on continued deposits are usually calculated after every week in an effort to make returns from the investment greater.
• Despite early withdrawal provisions, normally they come with fees that would have an impact on the interest earned in your account.

As per Axis Bank article titled “ Exploring different types of Recurring Deposit (RD) Accounts” published on 13th March 2024, there are 5 types of recurring deposit accounts – Regular RD Accounts, RD Accounts for senior citizens, RD Account for minors, NRE Recurring Deposit, and Tax Saving Recurring Deposit Account.

What is the amount of money required to be saved in a Recurring Deposit Account?

The amount of money required to be saved in a recurring deposit account is Only INR 100.

What is the minimum balance required in a Recurring Deposit Account?

Recurring deposit account does not have any minimum balance requirements, as the entire amount is deposited in fixed monthly installment.

What is the interest provided in a Fixed Deposit Account?

The interest provided in a recurring deposit account is currently ranges between between a range of 2.5% to 7% per annum. The interest rates are calculated over three months and are paid out after maturity, along with the principal sum.

5. NRI account (NRE & NRO)

A Non-Resident Indian (NRI) account is made solely for NRIs or Persons of Indian Origin (PIOs). NRIs are Indian people who live outside India for employment, business, study, or other reasons. The People of Indian Origins (PIOs) are also allowed to open an NRI account. There are two types of NRI accounts – NRE (Non-Resident External) and NRO (Non – Resident Ordinary).

A Non-Resident External (NRE) account allows Non-Resident Indians (NRIs) to deposit foreign currency in Indian banks and withdraw it in Indian rupees.

A Non-Resident Ordinary (NRO) account is a rupee-denominated account that allows Non-Resident Indians (NRIs), Persons of Indian Origin (PIOs), or Foreign Nationals to manage their income earned in India.

What are the Features of NRI accounts (NRE and NRO)?

The features of NRI (NRE and NRO) accounts are given below.

NRE account features:

• Interest: The interest earned in an NRO account is taxable at 30% and deducted at source (TDS).
• Joint applicants: NRO accounts offer joint account with a resident Indian or another NRI.
• Account types: The NRO accounts offer several types of account including savings accounts, current accounts, and fixed deposit accounts.

NRO account features:

• Easy access to funds: The NRO account offer easily access to funds in India and transfer money between countries for NRIs.
• Tax benefits: The NRO account comes with tax benefits that include tax exemption on interest earned from NRE accounts.
• Repatriation: The repatriation of funds from NRE accounts to foreign account of residence whenever required.

As per the article published on “Business Standard”, titled “Flows into NRIs deposits in India top $8-billion mark in 2022-23”, “the bank accounts of non-resident Indians (NRIs) held in India received $7.99 billion during April 2022-March 2023 (FY23), more than twice the $3.23 billion in FY22.”

“The NRI deposits rose sequentially from $135.54 billion in February 2023 to $137.88 billion at the end of March 2023, according to the Reserve Bank of India data.”

What is the amount of money required to be saved in an NRI account (NRE and NRO)?

You don’t need a specific amount of money to be saved in an NRI account.

What is the minimum balance required in an NRI account (NRE and NRO)?

The minimum balance required in an NRI account is given below.

• In a NRE account, you will have to maintain an balance of 10000 to 25000 rupees, depending upon the bank your account is in.
• In NRO account, you need to maintain an account balance of 5,000 to 10,000 rupees based on the bank your account is in.

What is the interest provided in an NRI account (NRE and NRO)?

The interest provided in an NRI account ranges between 2.70% to 6.75% per annum and vary depending on the bank. As of August 2024, the interest rates for Non-Resident Indians (NRIs) in India vary by bank, for example, the State Bank of India (SBI) offers an average rate of 2.70%, while IndusInd Bank offers up to 6.75%.

6. Senior Citizens Savings Scheme

The Senior Citizens Savings Scheme (SCSS) is a government-supported retirement benefits program for senior citizens in India that aims at providing a regular income for senior citizens after retirement. The scheme was introduced in 2004 and is available at post offices and public and private banks.

What are the features of Senior Citizen Savings Scheme (SCSS)?

The features of the senior citizen savings scheme are given below.

• Eligibility: The SCSS is offered to individuals who are 60+. Individuals in the age group of 55–59 and retired under Superannuation, VRS, or Special VRS are also eligible for this account. Additionally, a retired defense personnel who is 50 or older are eligible to open this account.
• Minimum deposit: The minimum deposit for Senior Citizen Savings Scheme (SCSS) is ₹1,000, and the maximum is ₹30 lakhs.
• Interest rate: The interest rate on SCSS account is 8.50% per year or more, and is paid quarterly, as of August 2024.

What is the amount of money required to be saved in a Senior Citizen Savings Scheme (SCSS)?

The amount of money is required to be saved in a senior citizen savings scheme is minimum ₹1,000 and maximum upto 30 lakhs.

What is the minimum balance required in a Senior Citizen Savings Scheme (SCSS)?

The minimum balancerequired in a senior citizen saving scheme is ₹1,000.

7. Joint account

A joint account is owned and controlled by two or more people and are useful for couples, family members, or business partners sharing financial responsibilities. For example, a joint account can be useful for couple who want to save money for a vacation.

What are the features of a joint account?

The features of a joint account are given below.

• The joint account provides equal ownership. The money, along with all transactions on such, is shared equally among everyone who has a joint account. 
• The joint account is a shared responsibility among its holders, and they have to bear the consequences of every financial transaction involving this particular banking facility. 

What is the amount of money required to be saved in a joint account?

There is no limit to the amount of money required to be saved in a joint account. You will choose how much each person should put into a joint bank account under the shared bills and household shopping as well as how much each of you earns.

What is the minimum balance required in a joint account?

The minimum balance required in a joint account is based on personal monetary objectives, such as short-term costs, long-range investments, or emergency funds.

What is the interest provided in a joint account?

The interest rates provided in joint accounts vary by bank. The example of interest on some popular banks are listed below.

• IDFC Bank: The IDFC bank offers a joint savings account with up to 7% interest per year with no fees on services like ATM withdrawals, cash deposits, and SMS alerts.
• Axis Bank: The Axis bank offers an interest on joint account account with up to 6.70% interest.
• AU Bank: The AU bank offers a joint savings account with up to 7.25% interest per year, and a monthly interest payout.

8. Demat account 

A Demat account also called as “Dematerialized account”, is an electronic vault for storing and managing investments including stocks, bonds, mutual funds, and ETFs. This account make easy to buy, sell, and transfer shares in the stock market by eliminating the need for physical certificates and paperwork.

What are the Features of a Demat account?

The features of the demat account are given below.

• By directing the depository participant to convert physical share certificates into electronic form, thereby making it easier to manage your securities.
• Holds securities in an electronic format. 
• Dividends, interest payments, and other benefits are credited directly to the Demat account without requiring any manual processing.

What is the amount of money required to be saved in a Demat account?

The amount of money required to be saved in a Demat account it is required by certain agents activating the account.

What is the minimum balance required in a Demat account?

There is no minimum balance required in a Demat account as they are mainly used for keeping securities.

What is the interest provided in a Demat account?

No interest is provided in a Demat account.

9. Salary account 

A salary account is an account where employers use to pay their employees’ salaries. It’s a convenient way for employers to deposit a fixed amount of money into their employees’ accounts each month.

What are the Features of the Salary Account?

The features of the salary account are given below.

• Salary account holders doesn’t need to keep a minimum balance, which in turn provides flexibility in managing their finances.
• Accounts get regularly credited with salaries, making sure that funds are available on time.
• It provides free bank services. A majority of salary accounts are offered with free cheque books, debit cards, and online banking, making it easier to transact.
• A salary account holder may receive some offers that are limited to them, as well as discounts and perks for financial products such as credit cards or insurance.

What is the amount of money required to be saved in a salary account?

There is no amount of money required to be saved in a salary account. Employees can withdraw all the cash they receive as earnings at once without facing challenges.

What is the minimum balance required in a salary account?

The minimum balance required in a salary account is zero.

What is the interest provided in a salary account?

The interest provided in a salary account is in the range between 3% to 6% per annum, just like normal savings accounts.

10. Corporate account

A corporate account, also known as a business account, is a bank account opened by businesses to store funds, receive income, and manage transactions. These bank accounts are used for various purposed including daily banking, investing and saving, tax filing, credit and loans, and automated payments.

What are the features of corporate account?

The features of corporate accounts are given below.

• A corporate account separates the funds of the company from the private funds of its owner, and this ensures that there are distinct records of finances.
• Compared to individual accounts, transacting limits in business accounts are generally higher so that firms dealing with substantial amounts of money can meet their requirements.
• In such accounts, there are usually multiple authorized signatories, therefore allowing several persons in these organizations to do various dealings themselves upon accessing their accounts.

What is the minimum balance required in a corporate account?

The minimum balance in a corporate account is required range from INR 10,000 to 25,000 or more, depending on the bank’s policies. Usually, corporate accounts have different minimum balance criteria across different banks.

11. Student account

A student account is a bank account customised to meet the needs of students and generally, offers benefits including interest-free overdrafts, cashback and free student railcards. The maximum age to open a student bank account in India differs from one bank to another but it typically ranges between 21 to 25.

A student bank account is useful for students to make payments and also receive money from parents or loans from banks.

What are the features of student account?

The features of student account includes no minimum balance requirement, overdraft protection, no monthly fees, no overdraft fees, cashback, limited banking services, debit card, digital banking and money management tools.

What is the amount of money required to be saved in a student account?

The amount of money required to be saved in a student account is generally zero but generally, it varies from bank to bank.

What is the minimum balance required in a student account?

No minimum balance is required in a student account.

What is the interest provided in a student Account?

The interest provided in a student account is not exactly available, but it depends on the banks. But it will be provided at a minimal rate.

12. Minor’s account

A minor’s account is a bank account designed primarily for minors, age below 18. Like other savings account, a minor account also requires a certain minimum balance, but this account has certain limitations that allow the parent/guardian of the child help them manage their finances.

The opening of a minor account involves keeping the minor name as the first account holder, and the parent/guardian as the joint holder and submit their photographs along with this form.

What are the features of a minor’s account?

The features of a minor account is more or less same as that of a normal savings account and includes child as the primary account holder and a parent or legal guardian as the joint holder, an ATM/debit card is provided by banks to access the account, but with a lower limit than a regular savings account, and the parent/guardian also get notifications of all the transactions.

What is the amount of money required to be saved in a minor’s account?

Generally, there is no limit on the amount of money required to be saved in a minor’s account.

What is the minimum balance required in a minor’s account?

The minimum balance required in a minor’s account ranges between ₹1,000 to ₹5,000, depending on the bank and type of account.

For instance, IDFC bank offers minor savings account where it offers up to 7.25% p.a., with no Average Monthly Balance requirement, sweep up facility and unlimited free ATM transactions at any bank, anywhere in India. Whereas, SBI offers two minors accounts namely Pehla Kadam and Pehli Udaan with limitations including per day transaction limit of Rs. 2,000 and ATM-cum-Debit Card with withdrawal/POS limit of Rs. 5,000 only.

What is the interest provided in a minor’s account?

The interest provided in a minor’s account ranges between 2.7% to 7.25% p.a. The State Bank of India (SBI) offers an interest rate of 2.7% whereas IDFC bank offers an interest rate upto 7.25% p.a.

How many types of primary bank accounts are there in India?

There are five types of primary bank accounts in India that are listed below.

• Savings Account
• Current Account
• Fixed Deposit (FD) Account
• Recurring Deposit (RD) Account
• NRI Accounts

What type of bank accounts are best for everyday transactions?

Current accounts and checking accounts are best for everyday transactions. Current accounts provide the ability to deposit or withdraw funds with no restrictions, regardless of the time or amount and therefore, this account is mostly used by businesses. But an individual can also open a current account, if he/she is a professional such as a doctor.

Checking accounts works a lot like current accounts and a person is able to withdraw cash whenever he/she demands it. Generally speaking, there is no restriction on the number of times a person use their account in one month.

How many types of NRI accounts are there?

There are three primary types of NRI accounts available to Non-Resident Indians (NRIs) in India. The details of the NRI accounts are listed below.

1. NRE Account (Non-Resident External Account):  NRE (Non- Resident External) account is a bank account in India where NRIs are eligible to hold and manage their foreign earnings in Indian rupees. The interests or income generated from this account is not taxed by Indian government. This account also allows transfer of funds (Principal and Interest) to a foreign account without any complications and restrictions. You must be an NRI to open a NRE account. An individual is considered NRI when a person spends less than 182 days in India in a financial year. An individual is also considered as an NRI is he/she stayed in India for less than 60 days in the previous year or less than 365 days in the last four years, according to the Indian Income Tax Act.
2. NRO Account (Non-Resident Ordinary Account): NRO stands for Non-resident ordinary. NRO account is opened for NRIs to manage their money earned in India such as rent, pension, dividends etc. This account allows individuals to receive funds in Indian as well as foreign currency. NRIs have to pay taxes in India on the interest earned in a NRO account, however, the account holders are allowed to transfer of up to $1 million out of India every financial year.
3. FCNR Account (Foreign Currency Non-Resident Account): FCNR or Foreign currency non-resident account offers NRIs to keep their money in foreign currency such as US dollars, British pounds etc. as fixed deposit account in India. The funds kept in this account and the interest earned on that are tax-free in India. Currently, the IDBI bank is offering the best FCNR rates in India. According to the Reserve Bank of India (RBI) data, the amount of money that came into FCNR accounts in FY24 is $6.37 billion, compared to an inflow of $2.44 billion in the previous year period (FY23).

What is the difference between a savings and a current account?

The difference between a savings and a current account is given in the table below.

Feature	Savings Account	Current Account
Purpose	Designed for individuals to save money and earn interest.	Intended for businesses and organizations for frequent transactions.
Interest	Earns interest on the deposited amount.	Typically, it does not earn interest.
Transactions	A limited number of transactions per month.	Unlimited transactions are allowed.
Minimum Balance	Generally lower minimum balance requirements.	Usually, it requires a higher minimum balance.
Overdraft Facility	Not usually available.	An overdraft facility is often provided.
Best For	Individuals, salaried professionals, and those saving for emergencies.	Businessmen, firms, and organizations need liquidity for daily operations.
Withdrawal Limits	There are restrictions on daily or monthly withdrawals.	Unlimited withdrawals depending on the account balance.
Account Type	Interest-bearing deposit account.	Demand deposit account with high liquidity.