Saving Account

Introduction to Saving Account

A savings account is one of the most common and a crucial product offered by the financial institutions where an individual can store and access his/her extra earned cash whenever required. Saving account makes sure that your hard earned money is placed safe and you can access it anytime you want. Every bank and financial institution whether it is public sector or private sector that has a retail banking division provides with a savings account to the customers. Opening a savings account is a hassle-free task; you just have to visit your preferred banking institution with valid documents and complete the formalities. Moreover, in the age of the internet, you can apply online for opening a savings account with the bank. On your acknowledgment, the bank will contact you to process your request. Different financial institutions offer different accounts which have its own set of features and benefits and depending on your requirements for a personal savings account, you can choose the favored options.  

You can earn interest on your savings account by depositing cheques or cash which will be credited to your account on a quarterly basis. However, the interest credited differs from bank to bank as every financial institution has their own-set of policies. Generally, it ranges from 3% to 6% quarterly. Withdrawals are an easy process; you can either visit the bank and cash out using a withdrawal slip, or you can use the ATM card provided by the bank for cash withdrawal. On the other hand, there is always a requirement of maintaining a minimum balance (average) in the savings account as per the bank’s rules to avail fluidity in banking transactions.     

Why Savings Account? 

The reason every individual must open a savings account is that it generates a habit to save whenever possible and in doing so, you can earn attractive returns on the deposited amount. Depending on the type of the savings account you chose, you can avail its benefits. Here are some characteristics of the savings account which makes it different from other types of banking accounts;

  • You can avail the benefits of an excellent amount of liquidity of funds. 
  • The savings accounts these days are feature packed, and you can easily pay your utility bills including phone recharges, electricity bills along with quick links for making easy transactions. 
  • Unlike current accounts, savings account comes with daily withdrawal limits. 
  • Salaried individuals prefer opening a savings account because it offers high interest compared to current accounts. 
  • You cannot use the savings account as a zero balance account, and hence, you are required to maintain an average minimum balance set by your bank else, the bank is liable on charging maintenance fees. 
  • You will be availed with personalized cheques which will enhance the security of your account. 
  • Deposit amount limit is not set. 
  • 4% to 7% yearly is the interest rate pegged on the savings account. 
  • ATMs and network branches of the respective financial institution can be easily accessed.

Types of Savings Account

As we know that different individuals have different needs and this is the reason why financial institutions have come with different savings account types to cater different needs of different individuals. These account types accommodate the needs of individuals of different work domains as well as age group. From senior citizens to women and minors/children, financial institutions offer dedicated savings account to every individual. Herein are some of the common savings account types which you can avail. 

  • Salary based savings account:

Only salaried individuals can opt for this type of savings account. However, the company you work for have tie-ups with certain banking institutions where they maintain accounts of their every employee. The best thing about salary based savings account is that it is a zero balance savings account that means; you are not required to maintain any sort of minimum balance. On the other hand, if your monthly salary is not credited for the past 2-3 months, your salary based savings account will automatically convert into regular savings account with minimum balance criteria. 

  • Regular savings account:

Following the financial institution’s most basic terms and conditions, regular or basic savings accounts are opened. This type of accounts doesn’t see much of a movement as the probability of cash depositing and withdrawal is rare. People mostly use this type of savings account as a virtual safe where they can ensure that their money is safe. 

  • Senior citizens savings account:

Individuals aged above 60 years are only allowed to open this type of savings account. Keeping in mind the needs of senior citizens of the country, this type of savings account avails numerous benefits such as wavier on minimum balance requirement, high-interest rates and more. 

  • Savings account for women:

This type of savings account is generally designed for the female entrepreneurs that offer attractive returns on their deposits. On the other hand, the account holders are liable to opt for high-value loans at superior rates. 

  • Savings account for minors/children:

You can open a savings account for a minor from a preferred banking institution. This type of savings account doesn’t require any minimum balance and parents or guardians of the minor can only supervise this type of account. 

  • Joint account:

You can open a savings account jointly with another individual related to you like your spouse or father or mother. For opening a joint savings account, you are required to provide the documents of both applicants. 

  • Zero balance savings account:

This type of savings account is the combination of current account and savings account with no limit on withdrawal along with no minimum balance requirement. Financially weak individuals can avail the benefits of zero balance savings accounts.          

  • Post Office savings account:

You can go to your nearest post office for opening post office savings account. The post office savings account follows the same procedures like the regular banks and serves the same benefits. However, they follow a lot stricter arrangements as far as security and ease of access to your account is concerned.

Eligibility Criteria for Savings Account 

The applicant is not required to provide any income slip or fulfill the employment criteria for opening a savings account at the financial institutions. There are minimal criteria that must be achieved in order to open a savings account. However, the different bank requires different criteria to be met with, but here are some of the basic requirements an applicant must fulfill in order to open a savings account in any of the major banks in India. 

  • The foreign nationals, Indian citizens or even the Non-resident Indians (NRIs) can open the savings account. 
  • The applicant must be above eighteen years of age. But, savings account for minors doesn’t require meeting up with this age criteria. 
  • There are no restrictions set with savings account but, some of the savings accounts require minimum balance or else, a penalty will be charged. 

Documents Required for Savings Account

The applicant must possess valid documents along with an application as per the standards of the bank in order to open a savings account. However, savings account requires minimum documentation to meet with such as the financial institution will ask for your passport size photos along with your KYC details and a duly filled form. Herein are the required documents that needed to be submitted to the concerned bank or financial institution to open a savings account. 

  • Two recent passport sized photographs. 
  • Duly filled application form from the bank. 
  • Address proof of the applicant such as voter ID, Bank statement, Driving license, credit card/electricity/water bill, property tax or rent agreement (any one). 
  • Signature and identity proof of the applicant such as Adhaar card, pan card, passport, driving license, employee identity card or voter ID card (any one). 
  • Prescribed signed HUF letter (for HUFs). 
  • Copy of Hindu Undivided Family form or PAN card (for HUFs).  
  • Address and Identity proof of the Karta (for HUFs).  
  • Karta’s declaration form (for HUFs).   

Savings Account Interest Rates

When talking about most of the banks (major), the rate of interest for savings account varies from 3% to 5%, but the rates totally depend on the bank’s liquidity requirements as well as the market conditions. Therefore, some of the banks offer higher rates on savings account while others offer lower rates and some of them offer moderate rates. For example, Axis Bank offers 3.5% per annum interest for savings account whereas; State Bank of India offers 2.5% per annum interest on savings account which is generally low as compared to Axis Bank. The rates offered by the banks are subject to change as per the directives set by the Reserve Bank of India. However, the interest rates are also set as per the minimum balance criteria. To avail attractive returns on your savings account, you must maintain a minimum balance requirement of Rs.10000/- in most of the cases. 

On the other hand, the interest rates pegged for savings account can be altered or changed by the Reserve Bank of India (RBI), depending on the economic conditions of the nation. All the monetary policies across India is controlled by Reserve Bank of India, and the institution is in full power over deciding the limits set for supplying the money to the market or releasing money from the market. On the other hand, to control instances like a general increase in prices or fall in the purchasing value of money, Reserve Bank of India is liable to limit the supply of money to the market, which in result will lead to a rise in interest rates for the savings account. Therefore, based on the supply and demand for money in the country’s economy, the interest rates for savings account may vary. When the demand is high, the rate of interest will certainly rise, and when the demand is less, the rates are low. Hence, if your bank requires more cash inflow, it will start offering attractive interest rates to lure the customers.      

Applying for savings account Online

With the rise in technology and the banking sector offering numerous features online, it has become easier for the individuals to perform numerous banking operations with just a few clicks. Opening a savings account is simpler via online medium, you just have to follow the simple procedures and fill in the correct details. Herein are the steps to consider while opening a savings account with a respective bank online. 

  • Before applying for the savings account, research the banks and other financial institutions that prevail the benefits of online facility to the customers. A background check is mandatory, find the bank which suits your credentials, and that matches your specific requirements. 
  • Note that not every financial institution or bank offers online account creation facility thus; only opt for that particular bank which avails this facility. When you find such bank, log on to the bank’s web portal. 
  • The portal will offer different types of products, but you only have to choose the one stating ‘savings account’. When you click on the savings account, a form will appear in a new tab. Fill out the bank’s application form properly and do not click the ‘submit’ button until you thoroughly check the form twice or thrice. You will be required to submit a digital copy of your address proof (voter ID, passport, etc), identity proof (Adhaar card, driving license, etc), employment proof or salary slip (if required), two recent photographs (scanned). On the other hand, in some cases, few banks don’t consider digital copies of the documents, so they will send their representative to your address to collect the hard copy of the documents. 
  • Your submitted form and documents will be verified by the back-end team of the bank, and if everything seems viable, they will send you the cheque book along with the ATM card and other catalogs, and you can start using your account instantly. 

Applying for savings account Offline (by visiting the bank) 

This is the most preferred choice of the customers while opening a new account with the bank as it gives them surety and they can see the whole procedure processing in front of their eyes. Also, there are some unavoidable trips to the banks which occur in cases like verification default or something else. And some of the banks and financial institutions don’t avail the facility of online account creation. By following the simple procedures, you can easily open a savings account by visiting the bank. 

  • The first step is always same, research the bank before joining hands with them. Check for the products they offer, the interest rates and other privileges. Opt for the one which you feel like that it matches my specific requirements.  
  • Fill out the bank’s application form properly and do not submit it until you have thoroughly checked it making sure that you have signed wherever the form says to and check it twice or thrice before submitting it to the clerk else, if any mistake arises, you will have to refill the form again. Next thing you will be required to submit is a copy of your address proof (voter ID, passport, etc), identity proof (Adhaar card, driving license, etc), employment proof or salary slip (if required), two recent photographs. 
  • After filling out the form and submitting the required documents, your whole credentials will be sent for verification and within 10-12 working days, depending on your bank, you can use your account. 

Best Savings Account offered by Banks in India 

Different banks provide with different schemes on the savings account, and it is up to you to choose the bank that fulfills your banking requirements. Things you must consider before opening a savings account with the bank is its approachability, security, efficiency and its dedication towards the customer while catering their services. 

Everybody’s needs are different, and therefore, it is difficult to tell which bank provides with the best products and services. Depending on the individual’s needs he/she will prefer a financial institution. 

Herein are some of the best banks regarding all terms that offer flexible savings account options to the individuals. 

  • Savings Account by HDFC Bank

HDFC is among those financial institutions that have the largest ATM networks all around the country. Thus, it is an ideal bank for those looking to open a savings account. However, the interest rates offered by the bank are slightly higher compared to other banks. On the other hand, the customer feedbacks are not in the bank’s favor as they are known for delaying customer queries.   

  • Savings Account by State Bank of India

If you are looking for a transparent and flexible banking solution, you can always opt for Sate Bank of India. The bank follows a balanced approach while dealing with the clients and its PAN India presence makes it favorable for those who are looking to open a savings account. Moreover, the interest rates the bank offers are attractive in comparison with other banks, and you can access your account via SBI website. 

  • Savings Account by ICICI Bank

ICICI Bank is one of the best private sectors banking institution that offers the customers with a wide range of banking products with numerous privileges and features. The bank doesn’t avail high-interest rates but is the most unparalleled when it comes to accessing the products and offers. With your ICICI bank mobile application and the online banking facility the bank provides, you can easily pay out the utility bills and save a lot of time in the process. 

  • Savings Account by Axis Bank

Axis Bank is another bank that provides the customers with a variety of personalized services like the savings account and more. Those who are looking to manage their finances can open a savings account with Axis Bank and can avail the benefits of attractive interest rates. 

  • Savings Account by Punjab National Bank:

Opening a savings account with PNB is simple and hassle-free. It is one of those banks that provide the customers with a wide range of banking facilities with minimum requirements.  

Checking Savings Account Balance

Checking the balance of your savings account is one of the simpler procedures that you can follow. Now, with every entity moving online, almost every banking institution has made their online presence. You are always welcome to check your savings account balance online with a secure interface. Moreover, you can visit the bank branch with authentication for generating the balance in your savings account. But, the best one and the most preferred procedure is to visit the nearest ATM and request for balance inquiry. On the other hand, some of the banks provide with the bank’s respective mobile application from which you can manage your accounts including balance inquiry.  

Post Office Savings Account  

Post offices apart from banking institutions are also known for providing the customers with savings account features with the following characteristics;

  • The interest earned on the savings account can peg the maximum of 4% per annum.
  • You are required to pay the account opening charge of Rs.20/-.
  • The minimum balance requirement for the post office savings account is Rs.500/- whereas; for the accounts without cheque facility it is Rs.50/-. 
  • On the other hand, you can transfer your accounts within the post offices across the nation. 
  • For the minors aged above 10 years can also open post office savings account. 
  • As per the customer’s requirements, single as well as joint accounts can be created.

Interest Earned on Savings Account Taxable or Not? 

Under the section 80TTA of Income Tax Act, if the interest income is up to Rs.10000/- then the interest generated will be considered tax free, and this is applicable across every banking and financial institutions in India including the post offices.

Minimum Balance for Savings Account

Most of the banks charge a maintenance fee depending on the type of savings account if the criteria are not met with. 

For instance, let’s take an example. Mr. Raju has a savings account with X Bank. 

The minimum balance requirement for X Bank is Rs.10000/-, and Mr. Raju makes sure that despite debiting the amount from the savings account he maintain the minimum balance criteria of Rs.10000/-. 

In case, where his balance drops to Rs.9000/-, X Bank will start levying maintenance charges. Let Rs.500/- be the maintenance charge. If Mr. Raju fails to maintain Rs.10000/-, X Bank will charge Rs.500/- every month as maintenance fee. 

On the other hand, if Mr. Raju fails to meet up with the minimum balance criteria for straight one and a half years, Mr. Raju’s X Bank account will show Rs.0/- as the balance because Rs.500/- was debited from his account every month by the bank as maintenance charges. That is; Rs.500 X 18 months = Rs.9000/-. 

The maintenance charges charged by most of the banks range from Rs.200/- to Rs.800/-, depending on the bank.