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Introduction to Banking

Deposit Accounts

Let us start with Deposit Accounts. They are mainly of three types:


Savings Bank Accounts:

As the name suggests, these accounts are designated to help people save money. People can deposit money in these accounts, which earn an annual rate of interest. The Reserve Bank of India (regulatory body of the Indian Banking system) provides guidance on the rate of interest that the banks can offer, however, each bank uses its own discretion to decide the rate of interest that it will offer to its customers.


Below are the savings bank account interest rates of some Indian banks as on Jan 2022. 



Upon opening a savings bank account, customers receive cheque books and debit cards to carry out transactions on these accounts. Depending on the nature of the account, the bank provides other facilities such as internet banking, mobile banking, and more. It can be opened by individual customers, associations, clubs, organisations and others. It is also possible that two or more people can jointly open a savings account as well.


Most banks have a wide range of savings account offerings for their customers. This allows customers to choose the kind of account that suits their needs. 


For example, Kotak Mahindra Bank has fifteen different kinds of savings accounts tailor-made to suit customer needs. From savings accounts specifically designed for women and children to accounts designed for a digitally inclined customer, the wide range of offerings makes the bank’s saving account products extremely popular. 


Current Accounts:

The nature of banking requirements differs considerably between different kinds of users. Businesses need to deposit and withdraw cash regularly, sometimes several times a day. This results in a continuous movement of money in business accounts. Moreover, businesses need facilities such as overdrafts, remittances, and others that individuals may not require. This is where a Current Account comes in. These accounts are offered to business entities so that they can conduct their business transactions with ease. No interest is paid by the bank on the money deposited in a current account. A current account can be opened by limited companies, partnerships, proprietorships, religious institutions, educational institutions, and any entity which needs such services. Current Accounts can also be opened by individuals singly or jointly. However, considering current accounts don't pay any interest, it is not a popular option among individual customers.


Different businesses have different kinds of needs which can vary considerably from each other. Hence, most banks have a range of current account offerings for their customers. Kotak Mahindra Bank offers ten different kinds of current accounts for its customers, which vary in features. Ranging from a Startup Regular Current Account to an Elite Current Account, the bank's offerings cover a wide range of business requirements.


Fixed Deposits:

These are deposits where customers pledge to keep a certain sum of money with the bank for a certain time period, and the bank, in turn, promises to pay them a fixed sum of money as a return. Fixed deposits can be created for a time period as low as seven days to as high as ten years. The percentage of interest depends on the time period for which the money is fixed with the bank. The rates of fixed deposits for the same tenure may vary from one bank to another. Traditionally, fixed deposits have been the most popular way of saving money in India. 

More on Fixed deposits have been discussed in detail in the upcoming units of this module.

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Units 2/42