Types of Bank Accounts

01. Bank Accounts: Meaning, Classification & Legal Nature

A bank account records a contractual relationship between a bank and its customer. Deposit accounts generally represent money owed by the bank to the depositor; loan accounts represent money owed by the borrower to the bank. The expression “type of account” can refer to the deposit product, ownership, customer category, currency or operating mandate.

Distinguish demand deposits from term deposits; individual from joint or institutional ownership; resident from non-resident status; and deposit accounts from credit accounts. These dimensions overlap, so a salary account may also be a savings account held individually.

02. Savings Bank Accounts

Savings accounts allow eligible customers to hold funds, receive credits, make payments and earn interest subject to the bank’s product terms and RBI directions. They suit individuals and other eligible account holders with routine savings and payment needs.

Banks specify eligibility, minimum-balance requirements where permitted, interest computation, service charges, withdrawal or channel conditions, and available facilities. A normal savings account should not be confused with the no-minimum-balance BSBD account.

03. Current Accounts

A current account is designed for frequent receipts and payments, particularly by firms, traders, companies and other eligible organisations. Current accounts normally do not earn interest and can have significant account and cash-management charges.

Account opening requires entity-specific documentation and due diligence. Credit facilities, opening restrictions for certain borrowers, transaction limits and cash deposit fees can be subject to current RBI directions and each bank’s policy.

04. Fixed Deposit (FD) & Term Deposit Accounts

A fixed deposit places money with a bank for an agreed period and interest basis. Terms can include cumulative or periodic payouts, premature withdrawal conditions, renewal elections and restrictions on partial withdrawals.

Bank-specific FD rates vary with tenure, deposit size, customer category and product. A depositor should distinguish contractual returns from effective annual yields after compounding and taxation; premature encashment can change the applicable return.

05. Recurring Deposit (RD) Accounts

A recurring deposit is a term-deposit arrangement funded by scheduled contributions over a chosen tenure. It encourages planned saving by matching a regular income pattern with a contracted maturity.

Missed instalments, delay penalties, preclosure and interest compounding follow product terms. Unlike a lump-sum FD, an RD receives contributions at different dates, so the same annual rate does not produce the same interest on the total contributions.

06. BSBD Accounts: 2026 RBI Rules

The Basic Savings Bank Deposit (BSBD) Account offers a prescribed set of essential banking facilities without a minimum-balance requirement. The revised RBI framework for covered commercial banks became effective on 1 April 2026, or earlier if a bank adopted it sooner.

Under the revised directions applicable to commercial banks other than Small Finance Banks, Payments Banks and Local Area Banks, minimum free facilities include cash deposits, unlimited deposits, an ATM/debit card without an annual fee, at least 25 cheque leaves a year, requested internet/mobile banking, passbook or monthly statement, and at least four free monthly withdrawals (including ATM transfers). Digital payments such as UPI, NEFT, IMPS and RTGS are not counted as those withdrawals. Different bank classes may have separate directions.

07. PMJDY & Financial-Inclusion Accounts

Pradhan Mantri Jan Dhan Yojana (PMJDY) is a government financial-inclusion programme that facilitates access to eligible basic bank accounts and linked services. It is not a separate general legal category equivalent to every type of savings account.

Scheme-linked benefits such as RuPay card, insurance coverage, overdraft eligibility and direct benefit transfers depend on the current official programme, bank terms and qualification criteria. Do not imply every PMJDY account automatically includes every advertised benefit.

08. Salary Accounts, Pension Accounts & Student Accounts

Banks commonly label certain savings-account packages as salary, pension, student, youth or senior-citizen accounts. These names describe customer eligibility or packaged services rather than wholly separate fundamental deposit categories.

Salary benefits may depend on continuing salary credits, the employer–bank arrangement and bank policy. Student and minor arrangements have age and operating restrictions, and pension credits require appropriate benefit/identity documentation.

09. Minor Accounts & Guardian Operations

Minor deposit accounts are opened and operated under applicable law and RBI/customer service rules. Depending on age, bank risk controls and account type, they may be operated by a guardian or by the minor under permitted conditions.

Account documentation identifies the minor, guardian and permitted authority. When the holder becomes a major, the bank may require fresh instructions and signature verification. Overdrafts and other credit should never be assumed to be available to a minor.

10. Joint Accounts & Operating Mandates

A joint account has two or more holders. Its operating mandate determines whether signatures of all holders are needed or specified holders may operate separately. Common expressions include jointly, either-or-survivor and former-or-survivor.

Operations while holders are alive and payment after a holder’s death must be understood separately; survivorship wording does not necessarily decide ultimate beneficial succession rights. Banks require mandate documentation and often nomination details.

11. Sole Proprietorship, Partnership & Company Accounts

Business accounts are opened in the legal name or permitted trade name of the business entity, with identification of the proprietor, partners, directors or authorised officers. The institution’s legal form determines documents and signing authority.

Typical evidence includes incorporation or registration papers, constitutional documents, resolutions, PAN/tax information where applicable, KYC of beneficial owners and account mandates. A sole proprietorship is generally not a separate legal person from its proprietor.

12. Trust, Society, NGO & Government Accounts

Trusts, societies, clubs, associations, local authorities and government bodies may maintain accounts when eligible. The bank verifies their legal status, governing documents, authorised signatories, beneficial ownership and purpose of funds.

Charity or non-profit status does not exempt an entity from KYC or tax and foreign-contribution requirements. Government scheme accounts, escrow accounts and public funds can have special operating and oversight controls.

13. NRE Accounts: Non-Resident External

A Non-Resident External (NRE) account is a permitted rupee-denominated account for eligible non-resident persons under FEMA/RBI rules. It is commonly used to hold funds received through permitted inward remittances and other eligible credits.

NRE funds are generally repatriable within applicable rules; NRE deposits may have specified tax treatment under prevailing law. A change in residency status requires timely review and redesignation or closure as appropriate.

14. NRO Accounts: Non-Resident Ordinary

A Non-Resident Ordinary (NRO) account is a rupee account for permitted transactions of non-residents, often involving eligible India-source receipts such as rent, dividends or local income. Opening and operation are governed by FEMA and RBI directions.

Tax withholding and repatriation restrictions differ from NRE accounts. Qualified remittances from NRO balances may be possible within statutory limits and documentation conditions; never describe all NRO balances as freely repatriable.

15. FCNR(B) Foreign-Currency Term Deposits

Foreign Currency Non-Resident (Bank) accounts are permitted foreign-currency term deposits for eligible non-resident individuals under FEMA/RBI rules. They help eligible depositors avoid rupee conversion exposure during the deposit tenure.

Unlike NRE or NRO rupee accounts, FCNR(B) deposits are denominated in permitted foreign currencies. Tenor, interest ceilings/parameters, eligible currencies and early withdrawal conditions depend on operative RBI and bank rules.

16. RFC, RFC(D) & Resident Foreign-Currency Accounts

Returned residents and other eligible residents may hold specified foreign-currency accounts under RBI/FEMA rules. Resident Foreign Currency (RFC), Resident Foreign Currency (Domestic) [RFC(D)] and other accounts have different opening conditions and permitted credits.

Foreign-currency account availability is not general permission for a resident to maintain any overseas currency account. Authorised Dealer banks must follow residency, eligible credits, transfers and reporting conditions.

17. Escrow, Nodal, Collection & Settlement Accounts

Escrow accounts ring-fence money under contractual or regulatory conditions and release funds upon specified events. Collection and settlement arrangements support merchant payments, projects, acquisitions and other business flows.

Use of escrow, nodal or settlement accounts depends on transaction type and applicable RBI/other regulations. Such arrangements do not automatically earn interest or grant the account operator unrestricted beneficial ownership of funds.

18. Cash Credit, Overdraft & Loan Accounts

Cash credit (CC), overdraft (OD) and term-loan accounts record borrowing arrangements rather than depositor savings. CC and OD are often revolving or limit-based, whereas a term loan is normally disbursed and repaid under a schedule.

A positive balance or credit in a borrowing account is not automatically a deposit with ordinary interest treatment. Lending facilities depend on sanctions, drawing power, collateral and borrower performance.

19. Demat, Trading & Investment Accounts

A Demat account holds securities in electronic form through a depository participant, while a trading account enables eligible securities transactions through an intermediary. Neither is an ordinary bank deposit account.

A linked bank account is commonly used for payment and settlement. Securities and mutual fund holdings are not covered by DICGC deposit insurance merely because an investor’s bank account is linked.

20. KYC, CKYCR, PAN & Beneficial Ownership

Know Your Customer (KYC) requirements determine how banks identify and verify customers and understand the purpose and risk of a relationship. Depending on type, onboarding may include officially valid documents, PAN/Form 60 where permitted and beneficial-owner checks.

CKYCR refers to the Central KYC Records Registry. Customer due diligence, periodic updates, politically exposed persons, source of funds and ongoing monitoring are governed by relevant directions and legal obligations.

21. Dormant / Inoperative Accounts & Unclaimed Deposits

Under RBI’s revised framework, a savings or current account is generally inoperative when there have been no customer-induced transactions for over two years. A bank-posted interest credit or charge alone does not count as customer activity.

Eligible balances may become unclaimed after ten years under the relevant framework and be transferred to the RBI’s Depositor Education and Awareness Fund. This does not extinguish the legitimate depositor’s claim. The June 2025 amendment also expanded facilitated KYC updation pathways for reactivation.

22. Nomination, Survivorship & Deceased Claims

Nomination identifies a nominated person for receiving or facilitating a bank deposit claim under statutory provisions. A survivorship mandate defines account operations/payments in joint-account circumstances, but neither should be described as automatically overriding succession law.

A bank applies the operative law, relevant nominations, survivorship mandate and required documents when settling deceased depositor claims. Estate/succession disputes may require legal adjudication, independently of bank discharge.

23. Interest, Minimum Balance, Fees & Tax

Account value depends on deposit interest, charges, average or monthly balance conditions, and taxes. Interest may be compounded or credited at a prescribed interval; current accounts normally pay no interest and other accounts follow agreed terms.

Banks may use an average monthly balance formula to test account package requirements where permitted. TDS, tax reporting, nomination, charges, account closure and service access are governed by distinct rules.

24. Deposit Insurance & Bank-Failure Protection

DICGC insurance generally covers eligible savings, current, fixed and recurring deposits of insured banks, up to ₹5 lakh per depositor per insured bank in the same right and capacity, including principal and interest.

Balances held at branches of the same insured bank are generally aggregated under the same legal capacity. Certain deposits and institutions are excluded. No standard DICGC protection attaches to mutual funds, ordinary securities holdings or NBFC deposits.

25. Account Selection: Decision Matrix & Comparisons

Choosing an account means matching purpose and residency to legal eligibility and the bank’s actual tariff. A retail worker, manufacturer, exporting business, student, minor and NRI can have very different needs despite using similar payment channels.

Use the comparison table as a framework—not a promise of availability. Ask about minimum balance, access, deposit/withdrawal rules, repatriation, tax, nomination, service charges and deposit insurance before deciding.

For numerical questions: State that the deposit insurance example assumes eligible deposits at one insured bank in the same right and capacity. Actual tax and product schedules vary.

26. Worked Cases, Formulas & Exam Traps

Case A: A worker receives monthly salary credits. A salary-tagged savings account may offer concessions, but it remains a savings account and special benefits can depend on salary inflow. Case B: A retailer makes hundreds of merchant deposits; a current account may fit operational needs, although charges and business KYC apply.

Case C: A depositor holds ₹3 lakh savings plus ₹4 lakh FD at the same insured bank in the same capacity. Qualifying insurance is not ₹7 lakh: the ordinary aggregate cap is ₹5 lakh. Case D: A savings account shows no customer-induced activity for over two years; the inoperative-account definition may apply even when automatic interest credits continued.

27. FAQs: Types of Bank Accounts

This quick-reference section addresses the recurring distinctions tested in banking, RBI, NABARD, SEBI and insurance-related examinations. The formal rule governing a bank product takes priority over a simplified teaching example.

Use the official links in the final chapter to verify changing features, directions, fees, tax exemptions and eligibility.

28. Official RBI, DICGC & Government References

The educational explanations have been written for Indian BFSI examinations, drawing on official guidance. RBI’s 2025 BSBD amendments became effective on 1 April 2026 for their defined category of commercial banks; inoperative account instructions were issued in 2024 and amended in 2025.

FEMA deposit regulations and RBI FAQs distinguish NRE, NRO and FCNR(B) accounts; government programme conditions and tax law are subject to amendment. Check the date and applicability of each official source before teaching it as a current rule.

1. RBI – BSBD Amendment Directions, 4 December 2025
2. RBI – Inoperative Accounts Revised Instructions, 2024
3. RBI – Inoperative Accounts Amendment, 12 June 2025
4. RBI – Foreign Exchange Management Deposit Regulations, updated June 2026
5. RBI – Accounts in India by Non-residents (FAQ)
6. RBI – Resident Foreign Currency Account FAQ
7. DICGC – Deposit Insurance
8. Government of India – PMJDY
9. RBI – KYC and Master Directions

Educational content reviewed 12 November 2026. Applicable bank charges, FEMA conditions, tax treatment and rules can change; consult operative circulars and the bank’s actual terms before making a financial decision.