Open your bank account today….

As we saw in the previous episodes banks play a very important role in our life and every one of us should have a bank account if not already opened. The easiest and best understood bank account is the savings bank account. This is the entry level banking product and almost hassle free. Irrespective of the family income each family should have at least one savings bank account .

Why to open a savings bank account?

Saving money gives freedom. With some money saved in the account we can take financial decisions more confidently. With ATM s installed in many places the money in the account can be withdrawn even during night time thus keeping the account holder tension free.The money saved in these accounts is risk free unlike some other options available.Though the interest earned by savings in these accounts is very low other advantages make SB accounts a necessity for any one. The very fact that the money is available immediately when we need is most comforting feeling one gets with SB accounts. Even the most liquid short term investments in the market do not offer such convenience and comfort anyday..

How to open a SB account.?

We can open our savings bank account in any bank branch which is close to our place of stay. There is no need to worry about whether it is a public sector bank or a private sector bank as the Reserve Bank of India and the Government of India have laid down stringent procedures for any bank to open branches and accept deposit from public.Once we decide to open an account we go to the branch, take the account opening form fill it with requisite details, affix our passport size photo and submit to the bank enclosing copies of our documents of ”KYC”.. These are nothing but documents indicating/confirming our identity, proof of address etc..Once the bank officials verify the copies with original and are satisfied they will inform us to remit the initial deposit to open the account..Within the next few minutes your account is opened and you are given a passbook showing the money remitted by you..With this you have now become an account holder of that bank branch. Simple it is really,..is it not?

More on KYC…

In simple terms KYC is the process of preparing ourselves to start our financial journey by obtaining some simple documents which is given by the Government or some of them by our employers . PAN card, passport, voter ID card, Aadhaar card, employee ID cards, are examples of KYC documents.Banks and other financial institutions require some of these documents to open account and /or avail loans from them.There is list of documents which can be used to verify the identity and address of the applicants which include electricity bills, landline phone bills, gas bills, ration card etc..Once the documents are found to be genuine and the KYC process is completed it remains so till there is some change in our residence, document numbers, account details etc and banks update the details of KYC periodically. The entire process of KYC verification does not cost the prospective customer except the xerox charges.

Different kinds of savings accounts:

Banks offer different kinds of savings accounts and we have to choose the one which suits our financial profile. Zero balance accounts, salary accounts,no frills account, and sweep accounts are popular with customers. All these kinds of accounts will have different set of rules regarding the balance to be maintained, number of operations, cheque books , and cheques returned unpaid. The brochures showing all these charges can be obtained from banks and the account holder should follow these instructions carefully to avoid any penalty charges being levied which will eat away our hard earned money..

Interest payments.

The present rate of interest paid on savings accounts is between 2.6%to 3.5% and interest is credited in the accounts periodically.(varies from bank to bank). interest earned in a year beyond Rs 10,000.is taxable.

Sweep accounts:

These sweep accounts are called by different names in different banks. The basic purpose to open these accounts is to transfer the balance lying in the savings account beyond a cutoff limit into fixed deposits which will earn a higher rate of interest. we can break these fixed deposits in case of urgent requirements..The attraction in this scheme apart from higher interest is that the process is totally automatic without any manual intervention..i.e no need for the account holder to intervene.Here again the cutoff or threshold limit for transfer of amount to fixed deposit varies among different banks. But this is good product which gives a better return on our money.

More on SB accounts and other deposit schemes next week..till then good luck.

Sincerely,

Pichai.

Chennai.

29/05/22