As defined by ‘Investopedia‘, a savings account is a deposit account held at a bank or any financial institution that provides principal security and modest interest rate.
For a common man, a savings account is where they can save their money and withdraw it when necessary.
Basically, a savings bank account acts as a repository of customer’s saving. It stores the money securely and gives interest on the deposit.
A savings account can be opened in a bank, post office, or any financial institution. However, banks are more convenient as their norms are customer-friendly and services are easily accessible. This article tells you how to open a savings bank account in a commercial bank in India while offering a brief insight into the benefits of having a savings account.
Opening a savings bank account is really very simple and easy these days and you can open it without much restrictions. Earlier you needed to have an introducer who is an existing account holder in the same bank, to open a savings bank account, but currently introduction is not mandatory.
Who Can Open Savings Bank Account?
Resident individuals, Non resident Indians, Foreign Nationals and other categories of applicants can open a savings account after complying with bank’s KYC requirements. Those who are below the age of 18 are also eligible to open a savings account under the guardianship of parents. Zero balance accounts can also be opened under the Pradhan Mantri Jan Dhan Yojana (PMJDY), given a set of conditions.
How to Open a Savings Bank Account?
It starts with choosing the right Bank. While many people select a bank on the basis of its distance from home or office, it’s important that you understand your own expectations and requirements first and invest some time in researching about the bank. Below are the steps to open a savings bank account.
Select the Right Bank
Accessibility is a real life issue. When the bank is located in the same locality as yours, it’s easier to carry out the financial and non-financial transaction. The same holds true for its ATM network. However, before selecting the bank make sure the Internet banking and mobile banking services are available, since you are going to use the facilities over the time.
Visit the Bank or Bank’s Website
Visit bank’s website to know more about the bank you want to have your account in. Websites are the best place to acquire more information on their services, products, and facilities. Besides, you can choose to visit the branch office physically during the business hours. Most of the commercial banks are open from 10am to 4pm on week days including 1st, 3rd, and 5th Saturday and remain closed on 2nd and 4th Saturday, Sundays and public holidays.
Decide the Type or Scheme of Savings account
Banks have a good number of savings account schemes such as Basic Savings accounts, No Frill accounts, and Students account etc, each with its own rules, charges and fees. Depending on whether you want to operate it singly or jointly, the account opening will be subject to the submission of correct KYC documents. Pick a scheme type that serves your needs.
Keep the KYC Documents Ready
To open a savings account in your name you need to have a ‘Proof of identity’ and ‘proof of address’ together with two recent passport size photographs.
As per the RBI rules, there are six documents notified as ‘Officially Valid Documents (OVDs)’ for the purpose of producing ‘Proof of Identity’. Those are
- Driving Licence
- Voters’ Identity Card
- PAN Card
- Aadhaar Card issued by UIDAI
- NREGA Card
You need to submit any one of these documents as proof of identity. If these documents also contain your address details, then it would be accepted as ‘proof of address’. If the document submitted by you for proof of identity does not contain address details, then you will have to submit another officially valid document which contains address details.
Recommended Reading- RBI Master Circular as on June 2014
Comply With Bank’s KYC Rules
The practice of obtaining these documents is a part of the KYC norms. KYC means ‘Know Your Customer’ and this is a process by which, banks obtain information about the identity and address of the customers and ensure that banks’ services are not misused.
The KYC procedure is to be completed by the banks while opening the accounts. In fact, KYC is mandatory for this purpose.
Therefore, the verifying officer has to make sure that the documents you have submitted are genuine.
If you don’t have documents to authenticate your identity, you will not be able to open the account.
Fill out the Forms
When the documents are verified, you’ll be provided with savings account application and due diligence Form. Fill out the spaces properly and paste your photographs in the given space. Put your signature on the forms and photocopies of the KYC documents in the presence of the verifying officer. The signature you put there will be saved in bank’s database. You will have to use the same signature to operate the account, withdraw money, or whenever you sign a cheque.
Deposit the Initial Amount
After the submission, you will be requested to deposit some money in the account. Usually it’s the average or minimum balance prescribed for the account you have opened. Collect the receipt after you deposit the money and keep in touch with the banker as to know exactly when you can come back and collect your passbook, ATM, or Cheque book, if applicable.
Once your account is opened, you are required to maintain a certain amount in a given period of time. This is called the ‘minimum balance’ or ‘quarterly average balance‘. When you don’t meet the prescribed minimum balance, the bank levies a penalty.
You can open a savings account online where you just have to,
- Visit the bank’s website
- Go to the personal banking section
- Apply for the specific savings account scheme
- Fill out the online form
- Provide details and verify them
After a certain step you might have to download the online form, print it out and mail it to the bank after signing it.
Questions You Need to Ask the Banker About Your Savings Account?
There are different types of savings account schemes whose operations vary according to what they constitute. However, regardless of the scheme types, there are some basic information you really need to have, in order to avoid penalties or confusions in future. All you need is ask the following questions and remember the answers.
- How many withdrawals I am allowed in a month?
- Can I get SMS notification for the transaction I make? Do you have any fees for SMS alert?
- What is the minimum amount required to open the account?
- What is the minimum balance I am supposed to maintain in the account?
- What is the Average Quarterly Balance of the account?
- What is the penalty for not maintaining the minimum balance?
- Can I avail an ATM or cheque book?
- What is the annual charge of the ATM and what are the charges for check books?
- What is the maximum amount I can withdraw at once?
- What other bank products and services I can make use of?
(You can also ask about their Locker facility you would like to avail one)
Benefits of Savings Account
Now that you know how to open a savings bank account, it’s important to know what benefits it offers and how it serves our financial needs.
It Inculcates Saving Habit
Saving is important for three basic reasons; emergency, necessity, and daily expenses. A savings account helps you in getting in to the habit of saving, so you can sustain your future expenses.
It Protects Your Money
Banks act as a repository of your money. They accept your deposits, keep it safely, and let you withdraw whenever you need it. Moreover, they not only protect your savings but, also help you manage your finances in a better way.
It Earns You Interest
The money in the savings account doesn’t lie idle; it earns interest. Banks pay interest on your deposits, even when the account is dormant.
You Can Withdraw Whenever You Want
Banks operate at the best intention of your convenience. To withdraw money from your savings account, you can visit the bank during the business hours or go to an ATM with your ATM/debit card. Many ATM counters operate 24×7 so that you have the access to your money around the clock.
Use Cards for Cashless Transaction
Cashless transaction is an advanced way of carrying out banking operations. Banks tend to encourage their customers towards the extensive use of debit cards for withdrawals, deposits, tax and bill payments etc. However, it’s important that you follow the debit card best practices in order to prevent any potential frauds.
Transfer Money Online
Internet banking has opened so many ways of financial convenience. You don’t have to visit the bank to send money to you dear ones. Do it at home using the internet banking service of your bank.
Get Access to Negotiable Instruments
Negotiable instruments like cheques, demand drafts, and pay order can be conveniently used for outward payment and money transfer. The amount goes directly from your account to the recipient’s.
Get Monetary Benefits from Govt. Schemes
Govt. scheme like PAHAL transfers the LPG subsidy directly to your linked savings account.
Use Electronic Clearing Service
ECS is an electronic mode of payment, which is mostly used when the nature of transaction is periodic and repetitive. You can use this facility for payment of bills, loan installments, insurance premium, mutual funds etc.
Savings account is the beginning of your relationship with a bank. However, before opening the account make sure you abide by the terms and conditions of the bank to avoid confusions in future. Hope you find the article helpful. Add your valuable comments to make it more informative.