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BANK ( SAVING / RECURRING / TERM OR FIXED ) DEPOSITS 

 

TYPES OF BANK DEPOSITS / ACCOUNTS (BY BANKS IN INDIA)

 

 

 

Traditionally banks in India have four types of deposit accounts, namely Current Accounts, Saving Banking Accounts, Recurring Deposits, Fixed Deposits.   However, in recent years, due to ever increasing competition, some banks have introduced new products, which combine the features of above two or more deposits.  These are known by different names in different banks, e.g 2-in-1 deposits, Smart Deposits, Power Saving Deposits, Automatic Sweep Deposits etc..

 

CURRENT DEPOSITS /ACCOUNTS:

    These accounts are used mainly by businessmen and are not generally used for the purpose of investment.  These deposits are the most liquid deposits and there are no limits for number of transactions or the amount of transactions in a day.  Most of the current account are firm / company accounts.   Cheque book facility is provided and the account holder can deposit all types of the cheques and drafts in their name or endorsed in their favour by third parties.  No interest is paid by banks  on these accounts.  On the other hand, banks charge service charges, on such accounts.   

SAVING DEPOSITS / ACCOUNTS

    These deposits / accounts are one of the most popular deposits for individual accounts.  These accounts not only provide cheque facility but also have  lot of flexibility for deposits and withdrawal of funds from the account.   Most of the banks have rules for the maximum number of withdrawals in a period and the maximum amount of withdrawal, but hardly any bank enforces these.   However, banks have every right to enforce such restrictions if it is felt that the account is being misused as a current account.  The interest on these accounts at present is regulated by Reserve Bank of India.  Banks in India at present offer 4.00% p.a. interest rate on such deposits on daily balance basis.   Under directions of RBI, now banks are also forced to open no frill accounts which do not have any minimum balance requirements. 

RECURRING DEPOSITS / ACCOUNTS

These kind of deposits are most suitable for people who do not have lump sum amount of savings, but are ready to save a small amount every month.    Normally, such deposits earn interest on the amount already deposited (through monthly installments) at the same rates as are applicable for Fixed Deposits / Term Deposits.   These are best if you wish to create a fund for your child's education or marriage of your daughter or buy a car without loans.

Under these type of deposits, the person has to usually deposit a fixed amount of money every month (usually a minimum of Rs,100/- p.m.).   Any default in payment within the month attracts a small penalty.    However, some Banks besides offering a fixed installment RD, have also introduced a flexible / variable  RD. Under these flexible RDs the person is allowed to deposit even higher amount of installments, with an upper limit fixed for the same e.g. 10 times of the minimum amount agreed upon.

Such accounts are normally allowed for maturities ranging from 6 months  to 120 months. A  Pass book is usually  issued  wherein  the person can get the entries for all the deposits made by him / her and the interest earned.    Premature withdrawal of accumulated amount permitted is usually allowed (however, penalty may be imposed for early withdrawals).    These accounts can be opened in single or joint names. Nomination facility is also available.

 

The RD interest rates paid by banks in India are  the same as payable on Fixed Deposits, except when specific rates on FDs are paid for particular number of days e.g. 500 days, 555 days, 1111 days etc i.e. these are not ending in a quarter.  Click Here to know the  Highest FD / RD Rates of Banks in India - 2011

 

For Recurring Deposit Calculator click here

 

FIXED DEPOSIT ACCOUNTS / TERM DEPOSITS

All Banks offer fixed deposits schemes with a wide range of tenures for periods from 7 days to 10 years.   The term "fixed" in Fixed Deposits (FD) denotes the period of maturity or tenor. Therefore, the depositors  are supposed to continue such Fixed Deposits for the  length of time for which the depositor decides to keep the money with the bank.  However, in case of need,  the depositor can ask for closing (or breaking) the fixed deposit prematurely by paying paying a penalty (usually of 1%, but some banks either charge less or no penalty).   (Some  banks   introduced variable interest fixed deposits.  The rate of interest on such deposits  keeps on varying with the prevalent market rates i.e. it will go up if market interest rates goes and it will come down if the market rates fall.  However, such type of fixed deposits have not been popular till date).

The rate of interest for Fixed Deposits differs  from bank to bank (unlike previously when the same were regulated by RBI and all banks used to have the same interest rate structure.   The present trends indicate that private sector and foreign banks offer higher rate of interest.  

The rate of interest for Fixed Deposits differs  from bank to bank (unlike previously when the same were regulated by RBI and all banks used to have the same interest rate structure.   The earlier trend that private sector and foreign banks offer higher rate of interest is no more valid these days.  However, small banks are forced to offer higher rate of interest to attract more deposits.   Usually a bank FD is paid in lump sum on the date of maturity.  However, some banks have facility to pay interest at the end of every quarter.  If one desires to get interest paid every month, then  the interest paid will  be at a marginal discounted rate.  In the changed computerized environment, now the Interest payable on Fixed Deposit can also be easily transferred on due dates to Savings Bank or Current Account of the customer

 

Fixed Deposit Calculator - With Compounding of Monthly, Quarterly, Half Yearly or Yearly basis

Highest FD Rates of Banks in India

 

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