Banking Operations and Types of Accounts
This domain tests whether you can open the right account for the right customer and state the operating rules without confusing products.
What account opening actually requires
KYC is the gatekeeper: identity, address and photograph, PAN for specified transactions, all under the RBI Master Direction on KYC using a risk-based approach. Accounts then split into demand deposits (savings, current) and time deposits (fixed, recurring), plus the Basic Savings Bank Deposit Account used for financial inclusion.
Core rules you must be able to state
- Savings: interest-bearing, meant for individuals, withdrawal limits may apply.
- Current: business use, no interest paid, high transaction freedom.
- Fixed deposit: lump sum for a fixed term, penalty on early withdrawal; recurring deposit: monthly instalments.
- BSBDA/Jan Dhan: zero minimum balance; small accounts carry caps on balance, annual credits and monthly withdrawals.
- Joint accounts: operation singly or jointly as mandated; the survivor clause decides the balance on death.
- Minor: above 10 years may operate the account personally.
- NRE: foreign earnings, repatriable; NRO: rupee income of a non-resident, repatriation restricted.
Worked example
A vegetable trader deposits cash daily and issues many cheques. Reasoning: a current account fits, because it allows unlimited transactions and pays no interest. Parking business floats in a savings account would breach withdrawal norms and defeat the product's purpose; the trader may still hold a separate savings account for personal savings.
Traps that cost marks
Saying current accounts earn interest; forgetting nomination is optional but advised; assuming a minor's account is always run by a guardian; mixing NRE and NRO repatriation rules; claiming Jan Dhan needs a minimum balance.