Current account & Saving account
Demand Deposits
- Current Accounts
- Savings Accounts together are known as demand deposit, since they are payable on demand.
What is a Savings Account?
A Savings Account is the most common type of bank account. Almost every person you know will have a Savings Account or two. You can open a Savings Account with any public-sector or private-sector bank, Indian post office or a co-operative bank. As the name suggests, the purpose of a Savings Account is to encourage people to save.
How is depositing money in a bank account ‘saving’? Well, when you deposit money in a Savings Account, you earn interest on it. The more money you deposit in your account, the more interest you earn. Also, your money doesn’t get locked in a Savings Account, unlike other investment options. You can deposit and withdraw money freely from a Savings Account and the interest is computed based on the average balance maintained for a certain tenure.
Most banks take into account your daily average balance. Hence, a Savings Account is the first step in personal money management. It’s also a good choice for individuals earning a fixed salary.
Salient Features Of Saving Bank Account –
- Saving Bank account is basically for individuals and small businesses.
- The objective of saving bank account is to promote savings.
- The rate of interest payable is very nominal on saving accounts. It is vary from bank to bank.
- Minimum Balance – (varies from bank to bank) – Normally Rs. 500 (without cheque book facility)
- Normally Rs. 1000 (with cheque book facility).
- Some banks like – HDFC, ICICI Bank – allow premium savings account deposits with minimum balance of Rs. 5000 or Rs. 10000.
- Bank offer zero balance accounts previously known as No-frills accounts / BSBDA and now under PMJDY.
What is a Current Account?
As with a Savings Account, you can open a Current Account with any public or private-sector bank. However, it makes sense only for businesses to open this sort of an account. Although no interest is earned on the balance maintained in a Current Account, deposits and withdrawals are unlimited and do not attract a fee. In essence, it’s like a Savings Account, but with add-on features that aid business continuity. A Current Account has many advantages. It is perfect for businesses and companies where the free flow of liquidity is essential to keep the engine chugging. Apart from unlimited withdrawals, you also get an overdraft facility and payment on standing instructions.
Features of Current Accounts :
(a) The main objective of Current Account holders in opening these account is to enable them (mostly businessmen) to conduct their business transactions smoothly.
(b) There are no restrictions on the number of times deposit in cash / cheque can be made or the amount of such deposits;
(c) Usually banks do not have any interest on such current accounts. However, in recent times some banks have introduced special current accounts where interest (as per banks’ own guidelines) is paid
(d) The current accounts do not have any fixed maturity as these are on continuous basis accounts
Now that you know the basics, let’s get into the details. Here’s a table that will help you understand the difference between the two.
| Features | Savings Account | Current Account |
| Interest Rates | Interest is calculated on minimum account balance held in the account. Since 2011, banks are free to offer their own interest rates. Rates may vary from bank to bank. | It is a non-interest bearing account. |
| Transactions | Banks have a limit on the number of free transactions in a month. A chequebook facility is given to account holders. | There is no limit on the number of transactions that can be carried out in this account. Cheque book facility is provided to account holders. |
| Minimum Balance | There is a required minimum daily average balance, which has to be maintained in the account. Penalties are levied if the minimum balance is not maintained. However, some banks offer no-frills Savings Accounts for salary account holders. | This criterion applies to Current Accounts too, but, the minimum balance amount is much higher. While the minimum balance requirement of some public sector banks starts from Rs. 1000, private banks can insist that you maintain Rs. 25, 000 to Rs. 75, 000 as quarterly balance. This varies for different types of accounts and locations. |
| Overdraft Facility | This facility isn’t applicable to most Savings Accounts and a customer cannot withdraw more than what is available in his/her account. However, some banks do provide this facility to account holders working in certain companies who have a salary account with them. | A customer can withdraw more than what is available in his Current Account subject to a maximum limit, depending on the account. |
