Savings Account

Overview Savings Account

A savings bank account is one of the most popular types of bank accounts held by individuals. A savings account allows you to keep your money safe while you earn money on it as interest. The bank pays you money to allow them to hold your money. The interest rate is usually a little above the inflation rate. A savings account also provides you cheque book facility and allows the account holder to make cash deposits and withdrawals. It is one of the easiest ways to operate your money by safely parking it in the bank account. There are some restrictions regarding the maximum number of withdrawals within a fixed period and the maximum amount that can be withdrawn.

Features of Savings Accounts

Here are some of the main features of a regular savings account:

Interest income: Savings accounts offer interest on the money held in the account. On the other hand, current accounts do not earn interest. The RBI had earlier allowed banks to pay only a fixed interest rate of 4% p.a. on the daily balance held in savings accounts. However, in 2011, the RBI deregulated the interest rates offered by banks on savings accounts. As a result, now each bank is free to set its own interest rate (within the framework of certain RBI rules).

Flexibility: Another feature of savings accounts is that they offer account holders a lot of flexibility in terms of withdrawal or deposit of cash. You can put in or take out money whenever you want to. This is unlike other kinds of accounts like a fixed deposit or recurring deposit account. A Fixed Deposit (FD) account, for example, does not have the easy liquidity of a savings bank account. If you are in urgent need for money, you might need to pay a penalty for breaking the deposit and making a premature withdrawal. Your money in a fixed deposit or Recurring Deposit (RD) account is locked for the tenure of the investment and you can make withdrawals before the maturity period only on paying a penalty. Similarly, you cannot make a partial withdrawal of your money from an RD. You would need to close the account completely and withdraw the entire amount. A savings bank account poses none of those problems.

Tax Benefit: You also get some tax benefit on keeping money in a savings account. Interest income earned from savings accounts of up to Rs. 10,000 a year is exempt from tax.

Why open a Savings Account?

A savings account offers several benefits including easy liquidity, interest income and ease of operating the account.

Liquidity: Unlike a fixed deposit or a recurring deposit account, you do not need to make a minimum deposit amount at fixed intervals. You can deposit and withdraw money from a savings account as per your requirements, without the fear of penalty fees.

Paying bills: With the advent of digital banking, it is extremely easy to pay bills, transfer funds and conduct various banking transactions with a savings account.

Safety: It is certainly better to store your money securely in a bank rather than keeping it as cash at home.

Types of Savings Account

Catering to the needs of various customers, each bank offers different types of savings bank account schemes. You can choose the one that is right for you to safely park your money. Following are types of savings accounts available.

Salary-based Savings Account

A salary-based savings account is usually opened by your employer. The choice of bank is determined by your employer and your salary is paid into that account each month. However, there may be other perks to the salary account. These could include

• Zero balance facility- While most savings accounts require a minimum balance in the account, salary accounts in India might not have that requirement
• A waiver on fees on your debit card
• Special discounted loan rates
• More number of free cash withdrawals from ATMs

Each bank will offer different benefits to their customers holding a salary account. The benefits depend on the relationship between your employer and the bank, the size of the relationship, and the facilities negotiated by the employer.

Do keep in mind that once you resign from your job, you will no longer be eligible for the benefits offered by the bank for the salary account. Typically, if your salary is not credited into the salary account for a specified number of consecutive months, it is converted into a regular savings account.

Savings Account for Senior Citizens

Several banks offer unique benefits to senior citizens holding a savings account. The age criteria may vary with each bank. The benefits could include cash delivery at home, discount on locker rental fees, discounts on medical expenses or even guidance on writing a will. Some banks may offer a dedicated Senior Citizens Desk at their branch to help older customers with their banking needs.

In addition to having a regular savings account, senior citizens can also opt for the Senior Citizens Savings Scheme (SCSS). It is open to any senior citizen of age 60 and above. NRIs and HUFs are not eligible to open this account.

An SCSS account offers a higher rate of interest than a regular savings account. Typically, the maturity period is 5 years.

Savings Account for Children and Minors

Several banks offer savings account for children with attractive benefits. The reasons for opening a savings account for a child or minor (under the age of 18) could include:

• Enabling the child to become financially literate at an early age
• Inculcating the habit of saving
• Ensuring they have a corpus for future commitments

There are a variety of other perks of having savings account for a child. Banks could offer the child an ATM card with the child’s name on it (subject to permission from the parents). Having a savings account under the supervision of a parent/guardian also helps children to learn spending discipline and helps them safely learn how to operate a bank account.

Some banks also offer education insurance benefit to cover the educational expenses of the child in the event of death of the accountholder’s parents or guardian.

Once the child turns 18 and becomes a major, the account can be converted into a regular savings account.

Savings Account for Women

There are exclusive benefits for savings accounts for women and these will vary from bank to bank. This could include exclusive offers on the debit card issued with the account, discounts on locker rental at the bank, entertainment or dining offers, higher ATM withdrawal limits, free cash withdrawals at ATMs, preferential rates on home loans, life insurance cover and coverage for a range of women-focused illnesses like breast or cervical cancer, and discounts on woman-oriented health check-ups.

The eligibility is very basic – any resident woman above the age of 18 years is eligible to apply to open this type of savings account.

Zero-Balance Savings Accounts

A zero-balance savings account simply means that you do not need to keep a minimum balance in the account for it to remain functional. Most banks have a minimum balance requirement for their savings accounts– typically ranging from Rs. 200 to Rs. 10,000 depending on the bank. There is a different monthly average balance for urban and rural areas. However, in a zero-balance account, you do not need to keep this minimum amount of cash in the account.

Eligibility to open a Savings Bank Account

Any individual above the age of 18 years can open a savings account. In general, the following individuals are eligible to open a regular savings account in India

• Resident Individuals above 18 years (sole or joint)
• Hindu Undivided Family (HUF)
• Resident foreign nationals (with the requisite documentation)
• Savings account for senior citizens: You need to be above 60 years of age
• Savings account for children: Need to be below 18 years of age, and have a guardian/parent
• Savings account for women: Applicants need to be women above 18 years of age
• Savings accounts for high net worth individuals: Applicants will need to maintain a high minimum Average Monthly Balance (AMB)

Documents Required to Open a Savings Bank Account

The following documents are required to open a savings account.

• Identity proof
• Address proof
• Latest passport-sized photographs

Most banks will ask for self-attested copies and originals for verification. The list of documents that are commonly valid for ID or address proof include:

• Passport
• Voter ID card
• PAN card
• Aadhar Card
• Permanent Driver’s License
• Job card issued by NREGA

If you are applying for a specific type of savings account, you will need the appropriate documents. For instance, if you are applying for an account that requires a high minimum monthly average balance, you might need to show additional income proof.

Best Savings Accounts in India

There are numerous banks in India that you can choose from for opening a savings account. Each has its own features that may or may not suit your requirements, so there is no single bank that can be said to offer the best savings account. You need to choose what suits your needs the best – and remember that what works best for you might not necessarily be the best option for someone else.

You could look at three main factors when deciding which savings bank account is best for you:

1. Interest rate: After the RBI deregulated interest rates on savings bank accounts, each bank has the freedom to set its own rates. Research the interest rates of the various banks and choose the best rates.

2. Customer service: You will very often be doing the transactions on your savings account, so it is important to know that the bank offers good customer service. You can get the reviews and rating of the banks online and choose the one that offers the best customer support.

3. Location: With the advent of Net Banking and Mobile Banking, it is not essential to have a bank that is located physically close to your home or workplace to carry out all your bank work. However, you might feel more comfortable having a bank that is relatively close to your home or office. For instance, a bank that offers high-interest rates on a savings account may not have a branch in the locality near to you.

4. Perks or benefits that accompany the account – For instance, a savings account specifically targeted at women might make a good choice for women as opposed to a general savings account open to all.

Savings Account FAQ