Savings Bank Accounts

As the name indicates, Savings bank accounts are intended for keeping savings of individuals and small businesses (other than business transaction purposes) for meeting their future money needs. Banks pay interest on these accounts with a view to encourage saving habit in the community. Currently, the rate of interest on savings accounts is regulated by Reserve Bank of India. Savings accounts can be opened by individuals, guardians (on behalf of their minor children/wards), clubs, associations, trusts, small businesses etc.

The Savings bank accounts are of two types

(a) Accounts with Cheque book facility in which withdrawals are permitted by cheques drawn in favour of self or other parties. The payees of cheques can receive payment in cash at the drawee bank branch or through their bank account via clearing or collection. The account holder may also withdraw cash by filling up withdrawal form or in ATM

(b) Accounts without cheque book where withdrawals are permitted to the account holders only at the drawee bank branch by filling up a withdrawal form or letter accompanied with the account passbook. In such accounts, third parties cannot receive payments.The main features of Savings bank accounts are as follows:

• Withdrawals are permifted on demand of the account holder by presentment of cheques or withdrawal form/letter. However, cash withdrawals in excess of the specified amount per transaction/day (the amount varies from bank to bank) require prior notice to the bank branch.

• Banks stipulate certain restrictions on the number of withdrawals per month! quarter, amount of withdrawal per day, minimum balance to be maintained in the account on all days, etc. and levy fee/penalty for violations of these rules. These rules are different for different banks. The rationaLe of these restrictions is that the savings bank account should not be used like a current account, as it is primarily intended for keeping and accumulating the savings.

• Banks pay interest on the minimum balance maintained in the account during the specified period of every month, say from 1 0th to the last day of the month. Let us illustrate this with an example. Suppose, in a savings bank account, the credit balances in the month of July were Rs. 20,000 on the 1 st, Rs. 1 2,000 on the 2nd, Rs. 8,000 on the 20th and Rs. 5,500 on the 30th July. The bank would pay interest only on Rs. 5,500 for the month of July..as this was the minimum balance maintained during July 10-31.

• Interest on savings bank account continues to be regulated by the Reserve Bank of India. It is 3.50% per annum and all commercial banks have to pay this rate on savings bank accounts.• No overdraft (payment in excess of the credit balance) is allowed in a savings bank account, as there cannot be any debit balance in savings accounts.

• Most banks provide, to every savings bank account holder, a passbook, wherein date-wise debit/credit transactiors and credit balances are shown as per the customer’s ledger account maintained by the bank. These days, banks offer printer statement of account as per the convenience of the account holder.

• Under electronic banking, a customer can access the account through internet by using a customer ID number and password assigned to him/her by the bank. The electronic banking enables the customer to transfer funds from one account to another, verify the transactions in the account etc. Nowadays customers can also get their account statement through e-mails.