The Reserve Bank of India has now eased the withdrawal limit for savings accounts. The withdrawal limit was initially curbed to Rs.2,500 as soon as the government announced their move to demonetize high-value tenders. It was then increased to Rs.4,500 from ATMs and Rs.24,000 from banks across the country, a few days later. In a recent announcement from the Reserve Bank of India, as of February 20, 2017, the withdrawal limit from savings accounts be enhanced to Rs.50,000 and as of March 13, 2017, there will be no limit on the amount one can withdraw from his/her’s savings account.

What is a Savings Bank Account?

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In today’s world, hard cash in a gunny sack isn’t the safest or smartest way to manage your finances. Today, we stash our money with banks, who have enabled us to track our balances, transactions, etc. through a variety of means – both in print, and online.

When an individual approaches a bank with some money and requires the bank to provide a secure place to store that money, the bank will offer the individual its most basic product – a savings bank account.

Current Accounts

Current account, also known as trading account is opened by individuals or entities for business purposes. Due to multiple payments and receipts, traders, entrepreneurs, business firms, etc., may need to operate their bank accounts on a daily basis. So, a current account is an ideal solution for this particular category of people as it imposes minimal restrictions on the number of transactions taking place in a day. Current accounts can be opened in the name of any of the following:

• Individuals
• Two or more individuals (joint account)
• Partnership firms
• Proprietary concerns
• Hindu Undivided Family
• Associations, trusts, and clubs
• Private and public limited companies
• Government departments, boards, corporations, etc.

Fixed Deposit Accounts

A fixed deposit account is a financial instrument which offers an interest rate higher than that of a savings account. Investors can fix their deposits for a period ranging from a few days to 10 years and earn higher returns. Your fixed deposit account expires at the end of the agreed tenure for which your deposits have been fixed. Penalty charges will be levied by the banks for premature closure of a fixed deposit account. The rate of interest of a fixed deposit account may vary from one bank to another and it generally depends on the amount deposited, tenure, and prevailing market rates.

Recurring Deposit Accounts

It’s a type of deposit account provided by banks to people with a regular income. Investors will have to issue a standing instruction to debit a fixed amount from their savings and credit it to the recurring deposit account. A delay in regular payments will result in reduction of the interest payable at maturity. Banks also provide loan facility on recurring deposits to their customers and it can go up to 90% of the deposit value.

Difference between Current Account and Savings Account

Why Open a Savings Account?

These are some characteristics of savings bank accounts that differentiate them from other types of bank accounts:

• Most savings bank accounts in India require the account holder to maintain a minimum account balance of a certain amount, failing which, the bank reserves the right to charge maintenance fees.
• Savings bank accounts generally offer an interest rate slightly higher than the rate of inflation, in order to keep the real value of money stable throughout the years.
• Modern savings accounts are feature packed and offer quick links to pay bills, make quick transactions, etc. to the account holder as soon as he / she logs in to the account.
• Savings accounts have daily withdrawal limits so that they aren’t used as current accounts.
• Savings accounts are generally not zero-balance accounts.
• Savings accounts offer an excellent amount (if not as much as current accounts) of liquidity of funds.
• Savings accounts are usually opened by salaried individuals, as business people usually prefer to maintain current accounts that offer less interest but more liquidity and generally have no minimum balance requirements.
• Banks customize savings accounts depending on the general type of usage the account witnesses in its lifetime.

A savings bank account is a virtual vault that holds your money, allows you to withdraw a certain amount from it at certain intervals, and adds to itself a small amount (as interest) each year.

Savings banks accounts (or savings accounts) are the most common type of bank account held by individuals around the world.

There Are a Few Different Types of Savings Accounts Available Today

Below is a list of some of the categories of savings accounts that are available from most banks:

Regular Savings Account

These are opened on the bank’s most basic terms and conditions. These accounts don’t see regular deposits of consistent amounts, nor do they see regular withdrawals. These are primarily the virtual equivalent of a safe where the money just sits waiting to be used by the account holder. These facilitate the most common form of virtual savings that aren’t touched, unless absolutely necessary.

Salary Based Savings Account

These most often opened by banks on the request of large companies that require a payment disbursal solution. Banks offer companies preferential rates and specific terms for these accounts – which will be individually handled by each of the latter’s employees. At the date of payment disbursal, the bank withdraws from the company account and disburses the required amount among the salary based savings accounts opened by employees. Generally, accounts that have regular deposits of consistent sums of money are viewed favourably by credit rating agencies. It should be noted that most salary accounts do not have a minimum balance requirement, but once the salary stops being credited (for whatever reason) for 3 consecutive months, these accounts are changed into regular savings accounts with a minimum balance requirement.

Savings Accounts for Senior Citizens

These accounts are created for senior citizens, with specific functionality and benefits for those in the senior citizen category. These function in the same way that regular savings accounts do, but generally offer higher rates of interest and exclusive banking privileges. They can be linked to other senior citizen savings schemes to remit the funds from retirement accounts or pension funds to consolidate all the funds under one single bank account – easily manageable by seniors.

Savings Accounts for Children and Minors

These accounts don’t generally have a minimum balance requirement and function in the same basic way as regular savings accounts. These are designed to educate the younger generation about modern day banking, facilities, and the general nuances of dealing with a savings account in a bank. These accounts are opened for minors and children by their parents or legal guardians, who supervise their use. This has been a successful step in encouraging the younger generation to save money and giving them a higher sense of responsibility when dealing with money.

Exclusive Benefits Accounts for Women

A relatively new offering from many banks, these accounts offer preferential interest rates for specific types of applicants. Female entrepreneurs holding these accounts are also eligible for high value loans at preferential rates, depending on the case and situation. These accounts also have exclusive features and rates that are beneficial to women in particular.

Zero Balance Savings Account

This type of account merges the best features of a savings account and a current account. While there are still limits on withdrawal amounts, these accounts are not charged any penalties if the balance in the account falls below the prescribed minimum. Sometimes, in cases where employees shift jobs and have to create new salary accounts – their old salary account will transform into a regular savings account – and when the balance inevitably falls below the minimum, they are charged a penalty or maintenance fee. This does not happen with these accounts. Usually, banks offer these accounts to the economically weaker applicants, but have started offering salary accounts as zero balance accounts due to their utility.

Linked Savings Account

A Linked Account is the term given to a savings bank account which is linked either to a Checking Account or a NOW Account (Negotiable Order of Withdrawal) by account number. Sometimes also referred to as a Package Account, the convenience offered by a linked account is that it allows the account holder the flexibility of moving funds to their demand account as required, while the majority of the funds can be kept in the saving account. The additional benefit this provides is that the customer is also eligible for free checking or lower service charges. In case of a Linked Account, the balance of this account as well as the Checking or NOW Account will usually be provided together on a single account statement which consolidates the balances of all these accounts. Linked accounts often also enable the account holder to earn higher interest on the funds that are stored in their savings account.

Post Office Savings Account

As the name suggests, a Post Office Saving Account is an Account which can be opened at a post office. Post Office Savings Accounts are quite similar to a regular bank savings account, but Post Office Savings Account have a stricter and more secure arrangement as far as the account holder’s funds are concerned. While a bank may not have branches in the every city, post offices are generally present even in the most remote of cities located in the regions that are usually not easy to access. Due to this very reason, Post Office Savings Accounts are now becoming increasingly popular as a an option for saving money. A Post Office Savings Account can be opened by an adult individual who is of Indian nationality. Minors above the age of 10 years can also open this account, or have a guardian open such an account on their behalf. Listed below are some of the notable features and benefits offered by a Post Office Savings Account.

• You can easily open a Post Office Savings Account with merely a cash deposit of minimum amount which is as low as Rs 50.
• Post Office Savings Account offer an interest rate that is equal to what most banks offer, which is at the rate of 4% per annum.
• The account holder has the freedom to close their Post Office Savings Account anytime they wish. The account can also be opened any time.
• Account holders have the freedom of to withdraw the funds from their Post Office SA fully or partially, as and when the need may arise.
• Post Office savings Accounts lower the risk exposure for account holders as they offer assured return on all investments that have been made by account holders.
• Offering a lower exposure to risk, Post Office Savings Accounts are an ideal form of investment for not only senior citizens but also for those individuals who have a regular and stable source of income.
• Since Post Offices have been established in a large number of remote rural areas, as compared to banks which may only be present in bigger cities, a Post Office Savings Account allows the residents of rural areas and villages the facility of opening a Savings Account as well.
• The process of opening a Post Office Savings Account is very simple and hassle free because these accounts do not have any option of a lock-in or maturity period for funds.
• Post Office Savings Account holders enjoy the facility to nominate a person to their account not only at the time of opening the account but also after the account has been opened.
• A Post Office Savings Account also offers account holders the flexibility to transfer their account from one Post Office branch to another, without having to change their account number.
• In case two or more adults wish to open a Post Office savings account they can easily do so by simply opening a joint account.
• Another benefit provided by Post Office Saving Accounts is that of account holding flexibility. Account holders can not only convert their individual account to a joint account but also convert a joint account to an individual account as well.
• At CBS Post Offices (Core Banking Solution), account holders have the facility of withdrawing and depositing funds electronically.
• Post Office Saving Account holders are provided with a pass book for keeping a record of all transactions.
• The maximum deposit that can be made into a Post Office Savings Account by an individual holder is Rs 1 lakh, while joint holders can deposit a maximum of Rs 2 lakh.
• Another important benefit provided by a Post Office Savings account is tax free returns. All returns on investments i.e. interest earned on account balance, up to the amount of Rs 10,000 will be exempt tax under the regulations of Section 10(15) of the Income Tax Act.

About DoP Internet Banking

The Department of Post also offers customers the facility of internet banking for carrying out banking related transactions online. There are various functions and features of the DoP internet Banking which are as follows.

• Profile Customization - Under internet banking, users can customize their profile by changing their Sign-on' and transaction password, set account references under settings, update their Channel ID and also view personal details.
• Accounts - Under the Accounts section, the user can view their account summary of various accounts such as their saving account, recurring Deposit account, PPF (Public Provident Fund) Account, TD (Time Deposit) Account and NSC (National Savings Certificate) Account. In addition to this, users can also view details of their loan on RD, loan on PPF and details of tax deducted at source.
• Transactions - Under internet banking, users can perform a number of account related actions and make requests such as managing payees and billers, transfer funds not only within but also outside the DoP, make withdrawals from their PPF account, view their transaction history, put money into their PPF account or repay a loan on their PPF account, view any recurring instructions, deposit money into their RD account and repay the loan on their RD account.
• General Services - The general services available under DoP internet banking include mails, mailing service related requests and inquiry requests.

Eligibility Criteria to Open a Savings Bank Account

In order to set up and operate a savings bank account from any of the major banks in India, applicants must meet the following eligibility criteria. Please note that this is a list of general requirements and criteria followed by most banks, but your specific bank may ask you for a more authentication or have different parameters:

1. Savings bank accounts can be opened by resident Indians, non-resident Indians (NRIs), and foreign nationals.
2. Age: Generally, banks allow only those who are 18+ to open an account on their own. However, savings accounts can be opened for minors by their parents / guardians.
3. Restrictions: Unlike other banking or financial products, there are almost no restrictions on who can open a savings bank account.

Documents Required to Open a Savings Bank Account

Given below is a list of the documents that the customer needs to submit along with his / her application in order to have a savings bank account opened:

• Proof of age and identity: Any authentic, registered, and recognized document issued by a competent authority, that contains the full name and a recent photograph of the applicant can be used. Customers should keep either a PAN Card, Passport, Driving license, Voter’s ID, etc. on hand.
• Photographs:Usually, banks require that you submit at least 2 passport sized photographs along with the application.
• Proof of address: Any authentic, registered, and recognized issued by a competent authority, which contains the address of the applicant can be used. Customers should keep either a Driving license, Voter’s ID, Passport, Utility bill, etc. on hand.
• Senior Citizen Card:Applicants who wish to open a senior citizen’s account are required to submit proof of their age. A senior citizen card works best for this.
• Proof of income:Depending on the type of account the applicant wishes to open, he / she may or may not be asked to submit proof of income and employment.

Depending on the applicant and the type of account being opened, the bank could ask for a few more proofs of identification, age, address, employment, etc. as required.

How to Open a Savings Account Offline?

While most bank related work happens online these days, some trips to the bank are absolutely unavoidable. In case you’re stuck without a portal through which to create a bank account online, you can follow these steps to open a savings bank account offline:

Step 1: Research different banks and their interest rates, find the one that best matches your specific requirements, if any, and the type of bank account you wish to open.

Step 2: Take a copy of your identity proof, two photographs, address proof, income / employment proof (if necessary), and age proof and head to the nearest branch of the bank in which you wish to create an account.

Step 3: Once at the bank, tell the clerk you wish to open a savings bank account, and he or she will hand you an account opening form.

Step 4: Fill out the form as required, and submit the same along with the copies of your identity proof, photographs, address proof, income / employment proof (if required), and age proof to the clerk.

Step 5: The clerk will then submit the application for processing and, depending on which bank you’ve chosen, your account will be opened and functional in any time between 1 and 12 working days.

How to Open a Savings Bank Account Online?

The simplest way to conduct banking operations is online, and opening a savings bank account is a very simple procedure:

Step 1: Research different banks and their interest rates, find the one that best matches your specific requirements, if any, and the type of bank account you wish to open.

Step 2: Log on to the website of the bank in which you wish to open your account. Note that not all banks have online account creation facilities.

Step 3: Fill out the online application form for the savings account that meets your needs and submit it along with a digital copy of identity proof, photographs, address proof, income / employment proof (if required), and age proof. Some banks may require you to submit physical copies of your documents for which they will send over an executive.

Step 4: Your details will be verified by the bank’s back-end team, and you will be able to start using your account almost instantly.

How to Open a Savings Bank Account at bankbazaar.com

A simpler way to do this, without having to undergo the rigorous and confusing step of researching the bank accounts, or having to deal with individual bank websites, is to use the bankbazaar.com application service.

Step 1: Log on to www.bankbazaar.com and select “Savings Account” from the “Investments” bar.

Step 2: You will be prompted to enter a few details like your gender, your city of residence, duration of employment, current salary, etc. in order to find a suitable account for a person of your description.

Step 3:The bankbazaar tool will compute all the information you have provided in order to find you an unbiased list of the best savings bank accounts in your location, and ask if you wish to apply for any of them.

Step 4: Pick the account you like from different banks, furnish your contact details and personal information, and the bank will contact you to complete the process.

Out of the three ways to create an account mentioned above, the third is the simplest and most effective, as it ensures that you find the account that is the best fit from across all banksfor which you are eligible.

Best Savings Accounts in India

While the interest rate offered is an important factor in deciding which bank you choose, there are other factors like the bank’s approachability, dedication to servicing the customer, the efficiency and security of its mobile app, etc. that one must also consider.

It’s difficult to say which bank and which product is the best, as every individual customer’s needs are different and specific to them alone.

Some may just want to park their funds and grow the corpus with a high interest rate (and not care much about the account’s actual usability), while others may want an account through which they can conduct their everyday transactions and will place more stock by usability and customer service than on the interest rate.

SBI Savings Account

State Bank of India savings accounts are among the most balanced – as there are SBI bank branches all over the place, and the rate of interest is always competitive. These accounts also have usability through the SBI website.

ICICI Bank Savings Account

ICICI Bank savings accounts may not offer the highest interest rate, but are almost unparalleled in terms of ease of use. The intuitive mobile app and online banking facilities with direct bill pay, etc. are excellent tools that can save time.

HDFC Bank Savings Account

HDFC Bank savings accounts offer a marginally higher interest rate, but the bank has been known to delay customer queries, and hasn’t received the best customer feedback compared to its rivals. Despite this, HDFC has among the largest ATM networks in cities, which makes it the ideal account for a certain type of account holder.

In the same way, most savings accounts offered by different banks in India have their own little perks and problems – you just need to find the right one that suits your specific needs.

How to Check Your Savings Account Balance?

You can access your savings account through a totally secure interface online, or at an ATM, or visit the bank with authentication. Today, most transactions through savings bank accounts are done online. Banks have made it incredibly simple to conduct basic and recurring transactions over the internet through their secure servers – which can be accessed through the respective bank’s smartphone app and websites.

Using the bank’s smartphone app, account holders can pay bills, check the account balance, transfer funds, and manage their finances in real-time, without the need to visit the bank at all.

Savings Account in Post Office

Apart from banks, the Indian Post Office also offers a savings account with the following features:

• Interest: Interest is offered at the rate of 4% p.a.
• Opening charges:Rs.20 is charged when opening the account.
• Minimum balance:
  • For accounts with cheque facility: Rs.500.
  • For accounts without cheque facility: Rs.50.
• Accounts are transferrable between post offices.
• Minor accounts can be opened for ages 10 and above.
• Single accounts and Joint accounts can be created as per the requirement.

In order to open an Indian Post Office savings account, applicants must approach their nearest post office branch.

Is the Interest Earned on Saving Account Taxable?

Interest income of up to Rs.10,000 that arises out of interest on the balance in your savings account is tax free under Section 80TTA. This is applicable for all savings accounts across banks and even Indian Post Office savings bank accounts.

Savings Account Minimum Balance

Many banks, depending on the type of savings account, charge a maintenance fee when the balance of funds in the account drops below a certain number.

For example, Mr. Babu has a savings bank account in Bank A.

Bank A has a minimum balance requirement of Rs.10,000 at any given time. Mr. Babu conducts transactions with amounts being debited and credited every so often, and incurs no additional charges as his account balance is always above Rs.10,000.

If his account balance drops to even Rs.9,000, he will start to face “maintenance charges” being levied on his account by Bank A. Let’s say Bank A charges Rs.500 as maintenance, this means that if Mr. Babu cannot raise the balance in his bank account to at least Rs.10,000, the bank will charge him this fee every month.

So, if Mr. Babu doesn’t raise his account balance and has no transactions in this account – in 18 months, Mr. Babu’s account will show a balance of Rs.0, as Rs.500 is being deducted every month. Rs.500 x 18 months = Rs.9000.

Banks charge anywhere between Rs.200 to Rs.800 as maintenance for the savings account every month that the minimum balance is below the prescribed amount.

Banks charge anywhere between Rs.200 to Rs.800 as maintenance for the savings account every month that the minimum balance is below the prescribed amount.

Savings Account FAQ's

1. What is the rate of interest offered for general savings account?

   Most of the banks offer 4% per annum for a no-frills savings account and the interest will be credited to your account on a half-yearly basis. However, the interest rate may vary depending on the type of savings account.

2. When it comes to a savings account, what is nomination? Whom can I nominate?

   Bank accounts have a concept of nomination wherein in case of the unfortunate event of your death, the person appointed by you as nominee will take care of your assets. For singly and jointly held deposit accounts, there can be one nominee. A nominee can be a family member, friend or any trusted person who is above 18 years of age.

3. How can I access my savings account held with a particular bank?

   Most of the banks offer customers the flexibility to access their savings account through multiple channels like bank branches, web portal, ATMs and through phone, mobile banking if available.

4. If I enable internet banking facility for accessing my savings account, what advantages do I get?

   With internet banking, you can view your personal savings account from the comfort of your home. Also, you can view monthly statements, enquire balance, transfer funds, update contact information, enquire cheque status and open a recurring or fixed deposit without having to visit the bank branch.

5. What is the meaning of average monthly balance?

   The AMB or the average monthly balance is the average of closing credit of each day for a calendar month. If a customer does not meet the specified average monthly balance requirements, non-maintenance charges will be levied. Some banks also have average quarterly balance requirements.

6. What is BSBDA?

   Introduced by the RBI, Basic Savings Bank Deposit Account (BSBDA) requires minimal documentation (KYC Documents only) and has zero minimum balance conditions. Any resident Indian over 18 years of age can open a BSBDA account in a bank of their choice. The customers will be offered services like cash withdrawal, free ATM-cum-debit card and deposits.

GST of 18% is applicable on all banking products and services from July 1, 2017 onwards.