Banks are those financial institutions that deal with money, its substitutes and help in providing financial services to common people. The main function of banks is to put the money of account holders to use by providing loans to those who can be able to use the money for different purposes. In simple terms, banks are the financial institutions involved in borrowing and lending of money. Banks play an important role in offering finances to people who are interested in investing and expanding.

Let us have a look at the main purpose and functionalities of banks.

  1. Banks are the custodian of the money of their customers. Banks are one of the most secure places where the money of the customers can be kept safely.
  2. Banks offer interest on the money deposited by customers in banks. By this offering of interest on money, banks help the customers in preventing loss of value of money due to inflation.
  3. As said earlier, banks offer loans to those customers who are interested in making complete utilization of the money such as firms and customers who can use the loan for business expansion.
  4. Banks offer financial advice and other financial services whenever necessary.

Today, numerous banks are offering financial services and assistance. However, you must be able to choose a bank which is the right one for you. This can be feasible by considering certain factors while searching for the right bank.

Types of Bank Accounts in India

First, let us check out the different types of accounts that are available in banks along with their basic features.

Savings Account

Savings Bank Account is opened by those persons who have a fixed and regular income. You can suggest your employees open a Savings Bank Account and encourage them to save money.

The major characteristic features of Savings Account can be mentioned below.

  • The rate of interest payable on Savings Account is nominal and currently, it ranges from 4% to 6% per annum.
  • In a Savings Account, your employees would not face any restrictions on the number of deposits made and the amount deposited.
  • Savings Account does not have any maximum period of holding and the money is always available.
    Your employees can make withdrawals from their Savings Account. Depending on the type of account, there might be certain withdrawal limitations or charges applicable for the same.
  • Moreover, withdrawal of money can be done either through cheque or by the help of a withdrawal slip from the bank or through an ATM or Debit card from an ATM Machine.
  • Your employees need to keep a minimum amount in the Savings Account to keep the Account active. However, if the account is tagged along with their salary, the minimum balance requirement might be waived off.
  • Facilities like e-banking, EFT, ATM cards, etc. are available which can be of great help to your employees. They can use their Savings Account Passbook or Bank Statement as an identity proof and residential proof.
  • Your employees would be able to avail other benefits offered by the bank through their savings accounts like:
    • Bank Fixed Deposits and Recurring Deposits
    • Credit Cards
    • Other investments like mutual funds, insurance, etc.
    • Avail loans, etc.
  • One person can have multiple savings accounts as there are no restrictions for the same.
  • A savings account can be opened by an individual or an HUF(Hindu Undivided Family)

Salary Account

Salary Account is a category of Savings Account into which you would be depositing the salary of your employees every month. Thus, you need to have a tie up with a bank to open the Salary Accounts of your employees in the bank and your employees would be able to reap the benefits of the same.

  • A Salary Account is also known as a Zero-balance Account i.e. there is no need of maintaining a minimum balance in this account and has the main purpose of salary being credited.
  • Usually, no interest is paid on the Salary Account.
  • The employees can also deposit money through cash and cheque into the Salary Account whenever required and use it as a regular savings account.
  • The basic benefits of a Salary Account would include:
    • Transfer of money to and from the same through the various channels offered by the bank like net banking, NEFT, RTGS, IMPS, etc.
    • Debit card and cheque facility for withdrawing of cash
    • Using the mobile banking facility through the registered mobile application
    • Your employees would be able to avail other benefits offered by the bank through their salary account like:
      • Bank Fixed Deposits and Recurring Deposits
      • Credit Cards
      • Other investments like mutual funds, insurance, etc.
      • Avail loans, etc.

Current Account

Current Accounts are otherwise known as Financial Accounts and are maintained to carry out a higher number of regular transactions with the bank especially for a business purpose. A current account can be opened by an individual as well as a non-individual like company, trust, organization, NGO, etc. So, as an organization you can have a Current Account but your employees cannot open a current account through your company, as they are salaried individuals. However, they would be able to open a Current Account in their individual capacity.

The basic benefits of a Current Account are:

  • There is no limit on the transactions of payments on a particular day in a current account
  • Since this is a business account, charges are usually higher than savings account
  • There is a minimum balance requirement in a current account as well, which varies from bank to bank and depends on the type of account, etc. Even the benefits like overdraft facility limit, cheque books, charges, minimum average quarterly balance (AQB) requirement, free demand draft, CMS (Cash Management System), etc. depends on the type of account and the negotiations done with the bank based on the book value of the account. Larger the account, higher are the benefits
  • Internet and mobile banking facility along with investment opportunity is available for current account holders as well along with:
    • Bank Fixed Deposits and Recurring Deposits
    • Credit Cards
    • Other investments like mutual funds, insurance, etc.
    • Avail loans
  • Loans are an important part of every business and current account holders usually get a preferred rate for the same as the payment for the loan would be recovered from the account itself.

Fixed Deposit Account

A Fixed Deposit Account is opened for a fixed duration of time by depositing a fixed amount of money at a predefined rate of interest. By this, your employees can deposit a fixed amount in the bank for a fixed duration of time and then withdraw the amount by the expiry period of the account through their existing Savings or Salary Accounts.

The basic features of a Bank Fixed Deposit Account is:

  • The Bank Fixed Deposit Account of your employees can be linked to their Savings or Salary Account
  • Since the Bank Fixed Deposit Account is a guaranteed product, the rate of interest is fixed for the specific tenure, which can range from 7 days to 10 years
  • The tenure of a Bank FD(fixed Deposit) is specified at the beginning and if the account holder wishes to withdraw money before the completion of the tenure, he would be able to do so but there might be charges applicable for the same
  • However, if the Bank FD is for a tax saving purpose under section 80C, i.e. for 5 years, then the same cannot be withdrawn before the completion of the tenure, even in the case of emergency.
  • The rate of interest varies from bank to bank on a regular basis and depends on the tenure of investment chosen. However, once chosen, the same is guaranteed for the entire tenure
  • TDS (Tax Deduction at Source) of 10% is applicable on the amount that is paid to the account holder if the interest is more than Rs 10,000 in one particular year, if Form 15G or Form 15H(for senior citizen) is not submitted on time.
  • There is a loan facility against the Bank Fixed Deposit as well.

Recurring Deposit Account

A specific amount of money when deposited at a Bank on a monthly basis for a specific tenure with a predefined guaranteed rate of interest, the same is called a Bank Recurring Deposit and the account associated with the same is called a Recurring Deposit Account.

Recurring Deposit Accounts are those accounts that are opened with the intent of utilizing the deposited amount in the future for the accomplishment of some long-term goals like the purchase of a car or some luxury items, wedding expenses of children, etc. So, your employees can open their RD(Recurring Deposit) Accounts through their existing Savings or Salary Accounts.

Some of the major features associated with the Recurring Deposit Account are mentioned below.

  • The minimum tenure for deposit into a Recurring Deposit Account is 6 months and the maximum is 10 years
  • The rate of interest varies from bank to bank on a regular basis and depends on the tenure of investment chosen. However, once chosen, the same is guaranteed for the entire tenure
  • Withdrawal of the Bank RD is allowed with the applicable charges but no partial withdrawal is allowed
  • TDS (Tax Deduction at Source) of 10% is applicable on the amount that is paid to the account holder if the interest is more than Rs 10,000 in one particular year, if Form 15G or Form 15H(for senior citizen) is not submitted on time.

And some of the benefits include:

  • A recurring deposit account will also help your employees in developing the habit of saving money.
  • There is a loan facility available with most banks for the Recurring Deposit

How to choose a bank for yourself?

While choosing a bank, there are some basic points which you should keep in mind. Let us have a look at some of the major things to look at while choosing a bank.

Safety: Security of your funds deposited

When you are choosing a bank, you should validate the security of the funds which you are going to deposit in the bank. Your bank is always insured and thus it provides apt security to your deposits. This is the primary reason for safekeeping your money with an entity like a bank.

Note: However, do you know the total amount of Insurance that is available for the money that you deposit in your bank in India? It is up to INR 1 lakh only. So, irrespective of what is the total amount of funds that you have in your bank, the insurance amount is at a flat INR 1 lakh only.

Charges: Transaction fees

Banks always charge a fee for the services they provide. However, there are some accounts like no-frills account or salary account or preferred accounts, where the charges are waived off.

Thus, you need to scout for those banks which have low charges and fees for the regular transactions which will be carried out in the banks. These fees can include monthly fees, processing fees, withdrawal fees, etc.

The difference in the rates of interest

Interest rates are related to the interest rate you will receive on your money deposited in the bank whereas another interest rate is related to that you will have to pay in case of any loan taken or credit card taken from the bank. You should always try and find a bank where the interest you receive on your deposits is high but the rate of interest on loans and credit cards is low.

Customer Service:

Customer Service is definitely a differentiating factor for choosing a bank. The bank you select must provide very good customer service. When you have queries or problems, you should receive proactive support and help from the customer representatives of the bank.

Ease of Transaction:

Even though in today’s age of technology, all transactions associated with banks can be done online but still there can be a certain situation in which you will have to deposit a cheque. In such a case, you should be aware of the physical location of your bank available near you. If you are frequently in need of depositing cash into bank accounts, then you must choose a bank that has physical locations near you for convenience.

Digital Support:

Mostly, all essential operations associated with the bank can be done online. So, a bank with a better internet banking and mobile banking facility is an advantage.

Once you have chosen a bank, you must choose the type of account that suits you the best. Even in a Current Account, there would be multiple types with varied benefits and varied AQB(Average Quarterly Balance) requirements. An account with a higher AQB would have higher benefits like dedicated Relationship Manager, etc. So, you need to weigh your requirements and then choose the type of account that suits your needs. Similarly, encourage your employees to do the same as well.

However, while you are selecting a particular bank you should be careful about these features and choose the ones which satisfy these criteria.

What questions should I ask my bank?

When you are choosing a bank, you should first ask certain necessary questions to your bank. These questions will help you in deciding about choosing the bank or not.

What are the options available for savings accounts, investment opportunities, etc. in your bank?

It is necessary to know about the options that are available with your bank about the savings account and other benefits like loans, investment opportunities, etc. This is a question you need to ask for the benefit of your employees. There must be a wide range of savings account options, investments and other benefits available at the bank and you must know about them in detail to be able to avail of the features and services.

What is the minimum balance requirement for keeping the account active?

Before you decide on opening an account in your bank, you must find out if there is any minimum balance that is needed to keep your account active. This would help you avoid unnecessary charges for not maintaining the same.

Is it easy for customers to avail of credit from the bank?

Usually, banks offer loans and credit cards to its customers at low-interest rates. You should check out if it is an easier process to procure loans or credit from the bank or not, which you or your employees might avail at any point of time.

What are the interest rates offered by the bank?

Banks offer interest to its customers for the money deposited into a savings account. You should thus be aware of the interest rates applicable in the type of account that you wish to avail.

Are there locker facilities available with the savings account?

Numerous banks offer locker facilities along with savings and current accounts. These locker facilities would be very helpful for you to keep your valuables safe. Your employees might also be able to avail this benefit.

Are there branches of the bank available nearby?

Even though most bank transactions can be performed online, there could be certain scenarios in which you would have to visit the bank. In such a case, you should be informed about the branches of the bank nearby for your convenience and you should be choosing a bank which has branches nearby.

What are the different types of debit cards and credit cards available for your employees?

Banks usually offer different types of debit cards and credit cards with various offers associated with them. VISA or MasterCard, RuPay Debit cards, Signature debit cards are some of the categories of cards available for transactions. You must know about the varieties of cards for convenience in choosing the card that matches your choice.

Are there facilities available for online banking? If so, what are the online services available for the customers?

Today, in this digital age all the banking operations are mostly performed online. It is necessary to know if your bank is providing online services for the convenience of customers or not. If so, what services are included in the online services? Many banks offer services like mobile banking, Pay Zapp, internet banking, etc. for their customers.

What is the schedule of charges for every transaction?

Charges are one of the highest incomes for a Bank. So, as a proactive customer, you need to be well versed with the schedule of charges so that you do not end up paying for the same unnecessarily.

What are the 5 most important banking services in India?

The 5 most important banking services provided by banks, other than safekeeping of your money and investment opportunity, can be summarized as:

Advancing of loans

Advancing loans is one of the most important services provided by banks. Banks can also be termed as financial organizations that are profit-oriented. Banks can provide loans to the public and the interest which is generated from the loan is the profit of the bank. After keeping some amount of cash reserve, as mandated by the RBI(Reserve Bank of India), the banks usually provide different types of loans to common people at a particular rate of interest which is mentioned before the product is signed up.

Overdraft facility

The process by which you can withdraw more than your deposits in your account is known as Overdraft. This is one of the important services provided by the bank by which they can lend money to people at the time of requirement. However, an interest is charged by the bank on the overdraft amount.
This is usually done to meet the emergency fund requirement for the short term.

Foreign currency exchange

Banks deal with foreign currency and on the requirement of customers, banks help in exchanging foreign currencies for local currencies. This is quite helpful in international trade as it helps in the settlement of the dues.

Discounting of bills of exchange

This is another means by which banks lend money to the customers. In this method, if you are the holder of a bill of exchange then you can get it discounted by the bank in the form of a bill of exchange. The debtor will accept the bill which has been drawn upon him by the creditor and will agree to pay back the amount on maturity. Then there are some marginal deductions made by the bank and then the amount is paid by the bank to you as you are the holder of the bill. On the maturity of the bill of exchange, the bank will obtain its payment from the party which had accepted the bill of exchange.

Internet banking and mobile banking

In today’s modern world, these services are the most essential services provided by banks. By online banking, you can perform all the transactions related to banks from any place only with the help of the internet. Similarly, mobile banking is another service that is adding to the convenience of people by which you can perform your banking transactions with the help of your smartphone applications. These services have made banking easier and even more convenient.

In addition to these 5 important services provided by banks, many other services are provided by banks such as money transfer, credit cards, debit cards, lockers, investment banking, consultancy, ATM services, wealth management, etc. as well.

Which are the top 10 banks in India?

There is no specific list or ranking of the top #10 Banks in India and it depends on a completely personal choice, but some of the the most popular ones are mentioned below(in no particular order):

1. HDFC Bank

The HDFC Bank is one of the reputed private banks of India having its headquarters at Mumbai. The bank has a total of 4,800 branches and 12,000 ATMs across the country. HDFC bank is popular among common people because of it being an eminent choice for opening salary accounts. The HDFC bank offers services such as Savings Account, Credit Card, Debit Card, Car loans, Forex card, etc.

2. Axis Bank

Founded in the year 1993, Axis Bank is the third-largest bank of India in the private sector. Axis Bank has around 3000 branches throughout the country and around 13,000 ATMs. The major services provided by Axis Bank are a savings account, fixed deposit, credit card, investment banking, insurance, mortgage loans, etc.

3. State Bank of India

The State Bank of India (SBI) was founded in the year 1806 and is headquartered in Mumbai. It is the oldest bank in India and offers services such as corporate banking, investment banking, car loans, home loans, savings account, asset management, etc.

4. IDFC Bank

IDFC Bank is famous among people for the excellent customer service they provide. The debit cards of the IDFC Bank have excellent features such as the use of ATMs all over India, better Fixed deposit rates, opening accounts is easier, etc.

5. Punjab National Bank

Punjab National Bank is a state-owned multinational bank of India with its headquarters in Delhi. The major services provided by the Punjab National Bank are debit cards, credit cards, internet banking, mobile banking, ATM cards, etc.

6. Bank of Baroda

The Bank of Baroda was nationalized by the Indian Government in the year 1969. There are around 5,538 branches of the bank and a total of 10,000 over the country. The bank provides essential services to its customers in the form of debit cards, credit cards, savings account, online banking, etc.

7. ICICI Bank

ICICI Bank is one of the reputed private banks in India with more than 8,700 branches and 14,000 ATMs all over the country. The major areas of functionality for ICICI Bank are investment banking, wealth management, asset management, life insurance, venture capital funding, etc.

8. IDBI Bank

The IDBI Bank is otherwise known as the Industrial Development Bank of India. It is a public sector bank that was founded in the year 1964. The IDBI bank is headquartered in Mumbai and offers a great range of loan options in a hassle-free manner. IDBI Bank can be chosen for private banking, investment banking, corporate banking, insurance, mortgage loans, agriculture loans, etc.

9. Canara Bank

The Canara Bank is one of the oldest public banks in India and was established in the year 1906. The Bank has its headquarters in Bengaluru and is a convenient choice for commercial banking, investment banking, private banking, credit cards, asset management, etc.

10. Bank of India

Bank of India is a commercial bank founded in the year 1906 and offers excellent services through online banking. There are almost 5000 branches of the Bank of India and have the main motive of serving the Indian communities.

Conclusion

Hence, banks play a very major role in the economy and its growth. The main intent of banks is to help the common people with various issues related to the transactions and operations being carried out in banks. It is quite necessary to be successful in choosing a bank which is right as the right bank would have those necessary characteristics which would be helpful for common people. Some basic questions and major characteristics should be checked out before selecting a particular bank.

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