Banking Awareness Question Day 3

Banking Awareness Question Day 3: Personal, Real and Nominal Accounts

Types of Accounts:

The debit and credit accounts rules are based on three types of rules, which are also called types of accounts in accounting. The different account types are

1. Savings Bank Account:

A savings account is an interest-bearing deposit account held at a bank or another financial institution that provides a modest interest rate. The financial institutions may limit the number of withdrawals you can make from your savings account each month. They also may charge fees unless you maintain a certain average monthly balance in the account. In most cases, banks do not provide checks with savings accounts.

2. Current Deposit Account:

“Current Deposit Account” is a demand deposit and is meant for businessmen, firms, companies, corporations, trusts and individuals with no restriction on the number of draws. An Individual singly or jointly, Sole proprietary business concern, Partnership or joint-stock Company, HUF firms, Limited Companies, Trusts, Association, Local Bodies, Societies, Executors and Administrators, Govt./Semi Govt. Undertakings, Agents on behalf of principal etc. can open the account under the scheme with a prescribed minimum balance.

No interest payable

Accepted in the accounts of individual(s) and sole-proprietorship concerns only.
Available within Bank’s Branches
1) Can be used for secured overdraft facility.
2) Standing Instruction Facility is accepted.
3) Debit cum ATM Card, Mobile Banking, Internet Banking, SMS services are available.

Daily Current Affairs Questions 24 October 2020

3. Fixed Deposit Account (also known as Term Deposit Account)

A fixed deposit is an investment account which is opened for a stipulated period of time by depositing a certain amount of money. The money with which this account is to be created is a fixed, one-time deposit with a fixed rate of interest.

  1. Recurring Deposit is a special type of deposit account which enables a depositor
    particularly in fixed income group to save by paying into the account an agreed fixed sum of money monthly over a stipulated period. The deposits in this type of account earn compound interest on quarterly basis. Longer the period for which monthly deposits are agreed to be made higher is the rate of interest subject to rules.
  2. BSBDA is a savings account that can be opened by any individual or HUF (Hindu Undivided Family) who has no savings bank account in that bank.
  3. BSBDA is a basic bank account that does not require an initial deposit to start the account. There are no minimum balance maintenance requirements for this account.
  4. If a customer has any other existing savings bank account, it will be required to be closed within 30 days from the date of opening a Basic Savings Bank Deposit Account.
  5. The account offers free-of-cost banking facilities, such as ATMcum-debit card, deposit and withdrawal of fund, using electronic payment channels, deposit or collection of cheques at bank.
  6. BSBDA account holders are allowed four free cash withdrawals in a month, balance enquiry through ATM is free for any number of times.

In November 2005, RBI issued guidelines for basic banking “no-frills” account with “nil” or very low minimum balance. In simple words, a service or a product is called ‘no frill’ when it is offered at cheap rate by removing the extra features. At present banks do not offer “no frill accounts”. As per the RBI notification in 2012, all no-frills accounts get converted into Basic savings bank deposit account (BSBDA).

Important points related to Interest Rates on Bank Accounts {Differential rate of interest (DRI)}

Interest on Savings A/c is calculated on daily balance basis.

Now, All SCBs (Excluding RRBs) have the discretion to offer differential interest rates based on whether the term deposits are with or without-prematurewithdrawal-facility, subject to the following guidelines:

a) All term deposits of individuals (held singly or jointly) of Rs.15 lakh & below should, necessarily, have premature withdrawal facility.

b) For all term deposits other than (i) above, banks can offer deposits without the option of premature withdrawal as well

Interest earned on savings bank accounts is not subject to Tax Deduction at Source. It is exempt upto Rs. 10,000 in a year.
A savings as well as a current account is classified as ‘inoperative’ or ‘dormant’ if there are no transactions in the account for over a period of two years. Interest credited by the bank on the balance in the account and any charges debited by the bank is not considered as transactions for this purpose.
Demand liabilities are those liabilities which are to be paid as and when demanded.
Example: deposit in saving and current accounts are demand liabilities. Banks has to pay then as and when demanded.
Time liabilities: are those liabilities which are to be paid on completion of prescribed period.
Example: bank fixed deposit for 6 months is a time liability payable after completion of 6 months.

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