Savings accounts are a boon for the common man

Most people maintain a savings account with their neighborhood bank. A savings account is defined as “a bank account which is the most common operating account for individuals and others for non-commercial transactions. A savings account helps people to put through day-to-day banking transactions besides earning some return on the savings made. Banks generally put some ceilings on the total number of withdrawals permitted during specific time periods.

Banks also stipulate certain minimum balance to be maintained in savings accounts. Normally a higher minimum balance is stipulated in cheque-operated accounts as compared to non-cheque operated accounts. The interest on funds in a savings bank account is calculated on a monthly or quarterly basis.

Traditionally the rate of interest that a savings account offered was controlled by the RBI. However since October 2011, the interest rate offered on savings accounts has been deregulated and most of the private banks have begun to offer higher rates of interest on their saving accounts.

The saving account is the focal point of all transactions now. A lot people in urban area have begun using services like net banking to ensure that they do not have to make regular trips to a bank. Most banks now offer variants of savings accounts that a customer can choose according to his needs.

The things that one should consider before opening a savings account are

• The amount of minimum balance that has to be maintained.

• Penalty charges in case the balance falls below the minimum stipulated amount

• Penalty in case of return of cheques issued.

• Other facilities offered like net banking, ATM cards.

• Details of charges, if any for issue of cheque-books and limits fixed on number of withdrawals, cash drawings.

The process of opening a savings account in India is very simple. Some banks even offer the account opening form as a downloadable document on their sites. The documents required for opening a savings account are

• Two passport size photographs

• Proof of residence like Passport/driving license/Gas/Telephone/Electricity Bill/ Ration card/voters identity card
• An introduction from an existing account holder of the branch.

• PAN number.

Currently most public sector banks offer an interest rate of 3.5 percent while some private sector banks have begun offering interest rates of up to 7 percent. Most experts speculate that the rise in interest offered will lead to banks charging their customers for services that were previously free or nominally charged. While most private banks have hiked their rates for standard services since the interest rate deregulation came into effect, the PSU banks have adopted a wait and watch policy. Savings bank deposits constitute almost 30 percent of the total deposit base of Indian banks. Even a small hike in interest rates means a huge out go for the banks. So be careful when you choose a bank and go through the fine print carefully before opening an account.