Feature Rich Savings Bank Accounts

Gone are the days of plan vanilla savings bank accounts. Increasingly more banks are trying to offer a chain of graded savings bank products to various segments of customers. These banks belong to foreign, private and public – all three sectors. Choosing a bank for opening savings bank account has become difficult because of variations in the product.

There is one underlying principle in all these product offerings, however. The higher the average balance you maintain in your savings account, the more rewards are offered to you. These rewards usually come in the form of:

Average quarterly balance

Rewards / Benefits

As you commit more AQB e.g., a)      up to Rs 10,000 b)      above Rs 10,000 up to Rs 50,000 c)      above Rs 50,000 up to Rs 1,00,000 d)      above Rs 1,00,000 up to Rs 5 lakh e)      above Rs 5 lakh

ATM Card on day ‘one’ Low charge -> free ATM/ Debit Cards Free access to other banks’ ATMs without limits Low charge -> free outstation cheques collections Low charge -> free money remittances Free RTGS, NEFT facilities Free net banking, mobile banking, sms banking Free SMS alerts Free ‘anywhere banking’ Free utility bill payment electronically Payable at par, multicity  cheque book facility PAN/TAN facilitation service Free of cost demand drafts, pay orders up to a limit Free demat account opening Concessional rates for buying gold coins in the bank Free ‘overseas travel card’ Online equity trading facility Free personal accident insurance Providing health insurance cover at reasonable rates Temporary overdraft facility in case of need Pick up of cash / document at customer’s door (up to specified amount & times a day) Delivery of cash / document at customer’s door (up to specified amount & times a day), etc

The above is just indicative. The rewards/ benefits indicated are not precisely linked to the increasing quantum of AQB linked in the left hand side.

Interestingly, grading and differentiations of savings are being done by all categories of banks. Examples:

Indian Overseas Bank, a prime public sector bank has array of products graded like Silver I, Silver II, Gold I and Gold II with increasing order of AQB requirements and levels of customer benefits/ rewards;

Yes Bank, one of the most promising and upcoming private sector bank has a slew of savings products like Savings Value, Savings Advantage, Savings Select and Savings Exclusive. These are in increasing order in the value chain with Savings Exclusive being the top end variant.

Lesson

If you are a discerning and demanding customer, you have to do some amount of home work before you decide where to open your savings account and what sub-type of account to open. You would do well trying to link your requirements with what are on offer in the marketplace.

Interest on Savings Bank Accounts

Interest on Savings Bank Account

Rate and periodicity

The periodicity of interest payment in savings account is usually half yearly. However, some banks pay interest at quarterly rests.

For long, banks in India used to pay uniform rate of interest in savings bank accounts. However since October last year, the RBI has permitted relaxations and allowed individual banks to fix up their rates subject to a couple of conditions:

(a) A bank has to have one single rate for all savings deposits up to Rs 1 lakh;

(b) A  bank can offer different rates for savings deposits above Rs 1 lakh, but it cannot discriminate between two or more such deposits in terms of rate of interest if made on the same date at any of its offices;

This has already made some impact and you may be interested to know if any bank has begun to offer more for savings deposit?

Most of the banks presently offer 3.5% p.a. for savings deposits. However you must have observed spells of advertising by a couple of banks that they are paying much more.

Kotak Mahindra Bank is presently offering 5.5% p.a. on all savings deposit with balance up to Rs 1 lakh and 6 % p.a. for those with balance above Rs 1 lakh;

Yes Bank presently offers 6% on all savings deposit with balance up to Rs 1 lakh and at 7% p.a. for those with balance beyond Rs 1 lakh;

If you maintain heavy balance in your savings bank account, you may be keen about the rates of interest offered by various banks.

TDS on interest paid on savings bank accounts

Banks do not deduct any TDS on interest paid to savings bank accounts.

How to get a Savings Bank Account - III - Cheque Books

Ensure you get it as per your choice

You may or may not be given the cheque book immediately upon opening your account. If the bank concerned has a centralised system for despatch of cheque books, it takes a few days. It may be sent to you at your address by courier. Note the following points with regard to the cheque book:

(a) It is usual for banks to issue a cheque book containing 10 leaves. If you require more leaves, please check with the bank officials and tell your requirements with reasons therefore e.g., the need to issue EMI cheques;

(b) Try to use ECS facility for regular payments instead of cheques. It is more convenient. I would describe the ECS mechanism with its attendant benefits later on;

(c) Depending on the value of your account, your bank may issue you a PAP cheque book. PAP stands for ‘payable at par’ at all branches of the bank across the country. For example, if you have a PAP cheque book issued by a branch of Bank X in Delhi, you can make payment to a party at Bangalore with such a cheque and that party can obtain the payment at any of the branches of X Bank at Bangalore. He can also deposit the same cheque in his account in Bangalore and that Bank can get it cleared for him at the local clearing. PAP cheque thus can be used in lieu of bank drafts or other forms of remittances to some extent;

(d) Some banks get your name printed on the cheque book issued to you. This gives you some measure of psychological satisfaction. It normally feels good to issue a cheque with your name printed on to it. Even the party who takes the cheque may somehow have a better perception about your creditworthiness;

A few basic things about the contents of the cheque leaves:

(i) MICR number – At the bottom of the cheque leaf runs a line containing four sets of numbers punctuated by delimiters e.g., 812321 400229055 647000 29

In the above line, the first six digits denote the serial number of the cheque. The next 9 digits signify the MICR no. Of these 9 digits the first 3 digits signify the place e.g., 400 refers to Mumbai. This is followed by three digits (here 229) signifying the code of the bank (229 refers to ICICI Bank) and the last three digit representing the code of the branch. The next six digits constitue the account number field and it is optional. In case of givernmnt cheques issued by RBI, this field is of seven digit length. The last two digits represent the transaction code e.g., savings bank. Government cheques drawn on RBI has code of three digits.

Please note that MICR stands for Magnetic Ink Character Recognition. This number is printed on the cheque leaves in special ink or toner that carry magnetic property making itself machine readable. Using this MICR band, it is possible to segregate hundreds of thousands of cheques according to banks, branches and account types in the quickest possible time and accurately so. This property of MICR is also used for electronic clearing system like ECS.

You are advised never to fold the cheques in a manner that could damage the digits printed in the MICR band, because this robs its machine readability. If you have done so by mistake, and the cheque requires to pass through bankers’ clearing system, it may not be accepted by banks for the purpose of collection.

(ii) IFSC number: IFSC stands for Indian Financial System Code. 

IFSC has been used earlier as the addressing code between banks for message transmission through structured financial messaging system. However, its benefit has now begun to touch large number of bank customers because of its use in money transfers using modern technology driven systems especially RTGS, and NEFT. Banks have been gradually allocating unique IFSC numbers to their branches in phases to reach the benefit to increasingly more customers. IFSC number is supposed to be just above the cheque serial number in the MICR band. It is a 11 character alphanumeric code as below:

  (a) first four characters represent the bank code;

  (b) 5^th character is zero (it is reserved for future use;

  (c) last six characters signify the branch code;

It is possible to transfer the funds accurately and expeditiously to the target branch using the IFSC number.

In April this year the RBI has advised banks to print the IFSC code in their customers’ passbook or bank statements.

How to get a Savings Bank Account - II - Account Nominations

The process and the benefit

You are entitled to make a nomination for your savings bank account. Generally, the printed account opening form contains a nomination clause. Some banks may use a separate form for this purpose linking it to the savings bank account. To make nomination, you have to:

(a) mention the name of the nominee in the nomination clause in the account opening form / appropriate form;

(b) mention the relationship of the nominee with you;

(c) if it is a joint account, all account holders must sign the nomination clause;

In the event nomination has been made, the bank would pay the balance in your account to the nominee in the event of the death of the account holder/s.

Nomination has many advantages. It makes life easy for the account holders, their legal heirs and also the bank. In the absence of nomination, the legal heirs have to submit specified succession documents in order to claim the money. It involves time and hassles for successors to obtain these. In addition, it takes several days or some times weeks, depending on the amount of the claim and the degree of complexities for the bank to settle legal claims. Nomination at once dispenses with such difficulties. In the event of unfortunate death of the account holder/s, the bank can promptly pay the amount to the nominee.

Minor as nominee

The nominee has always to be an individual. However, a minor individual can also be made a nominee. In that case, you have to mention in addition to the nature of relationship, also:

(a) his or her date of birth;

(b) the name of his or her legal guardian;

At the time of making the nomination, it is usually enough that you write the nominee’s name, address and other particulars and then sign. The nominee need not be present and sign in the form. However, the act of making the nomination must be witnessed, normally by two persons

Suppose you have not made any nomination at the time you opened the account. You can always approach the bank and do it at a later date as well.

How to get a Savings Bank Account - I

Let me begin a planned long series of discussions on various banking products and services with the vast community of bank customers across the country with savings bank account. My intention is to bring to your notice some points which to my mind should be known by all users.
Today, I propose to examine several features of a savings bank account some of which are basic, elementary whereas some are comparatively uncommon. Due to the length of the subject a subset of topics will be dealt with in this post and the remaining in next parts.

Opening a savings bank account

A savings bank account, in a way is like the root of a tree. All other accounts in fact issue forth as its branches. Usually, money is transferred to fixed deposit or recurring deposit from this account, interests credited into it and on maturity the principal with interest come back to it. Similarly, while you take a loan, the margin money (your contribution) is taken from your savings account whereas periodical installments are also recovered from it. It is only in the fitness of things that you duly complied with bank’s rules and regulations at the time of opening the account itself. 
Remember that once you have opened a savings account, you are eligible to deposit every cheque, draft or pay order drawn in your name into this account. The bank then collects these instruments from respective banks and credit to your account.

Introduction

Your bank would like to ensure itself about your identity. Remember after your account is opened, your bank is committed to collect all cheques, drafts etc on your behalf. If later on a dispute arises as to the ownership of these instruments, your bank has to prove to authorities concerned that it had taken due care in opening the account. It does in any one or both of the two ways:
(a) It insists that you are introduced to the bank formally by any of its existing customers, staff or a local person of repute;
(b) It insists that you submit at least two standard documents – one, proving your identity and another, evidencing your address;
Practices vary amongst banks as regards ‘introduction’ and the ‘documents’ that they would accept as proof of identity and address. Some banks, particularly belonging to the private sector, may consider two or even one of these specified documents e.g., Voter I Card (serving dual purposes) as adequate and dispense with introduction by another customer. 
Practice also varies across regions. In some places banks may accept ration cards or even rent / lease agreement as sufficient address proof. At the end of the day, you have to address the bank’s rules so that it can satisfy itself about your identity and the correctness of your address.
Some of the common documents usually accepted by the banks are furnished in the table. However, you may check with the bank concerned to avoid any last minute inconvenience:

Document accepted as ID proof	Document accepted as address proof
Passport	Passport
Driving license	Driving license
PAN Card	Voter I card
Employee I Card issued by Government department	Electricity bill
Voter I Card	Ration Card
Photo I card issued by Defence	Telephone Bill (BSNL/ MTNL)
Valid photo pension book	Recent Credit Card statement
Valid freedom fighter's pass	Employer’s certificate on letter head

You need to submit:
(a) copies of two documents one for ID proof and another for address proof;
(b)  two copies of recent passport size photographs
Please self attest the copies of the two documents. Also carry the original for verification by the bank officials. Those would be returned to you.

Documents to sign

You have to sign an account opening form and append your specimen signatures either on the form or separate specimen signature cards as per concerned bank’s system.
Remember the specimen signature well because you have to sign exactly the same way in future when signing cheques or issuing any operational instructions to the bank.

Nature of relationship with the bank

The account opening form constitutes the contract between you and the bank. The legal position between you and your bank is that of creditor and debtor respectively. The bank has a further obligation of making the payment of your cheque if properly drawn and presented upon it.

Joint account

There is theoretically no restrictions on the number of persons who can open a savings account jointly. However, it is necessary that savings account is not opened and used for business purposes. Usually, two or at the max three to four persons of same family, social or professional group etc open joint accounts.
Take care to properly mention the ‘repayment condition’ and ‘operational condition’ in a joint account.
Repayment condition – This would apply at the time of closing the account. You can give specific instructions about to whom the balance standing to the credit at that time ought to be paid. Examples of options are as below:
(a) Jointly to all
(b) Either or survivor (in case the account is held by two persons)
(c) Any one of us (in case the account is held by more than two persons)
(d) No 1 only, or No 2 only or No 3 only
(e) No 1 only or survivors, etc


In the next post, operation of the SB account, nominations, minimum balance, cheque books, ATM / Debit cards etc will be dealt with.