Question

what is the difference between a savings account and current account?

Answer 1

What is a Savings Bank Account?

As the name denotes, this account is perfect for parking your temporary savings. These accounts are one of the most popular deposits for individuals. These accounts provide lot of facility and flexibility for deposits and withdrawal of funds from the account. Most of the banks have rules for the maximum number of withdrawal within a particular period. At present the interest on these accounts is de-regulated by Reserve Bank of India.

This account gives the customer a nominal rate of interest and he can withdraw money as and when the need arises. The position of account is depicted in a small book known as 'Pass Book'. Such accounts should be treated as a temporary parking area because; the rate of interest is much less than Fixed Deposits.

The main advantage of Savings Bank Account is its high liquidity and safety. On top of that Savings Bank Account earns moderate interest too. The rate of interest is decided and periodically reviewed by the Government of India. These Accounts can be opened in the name of an individual or in joint names of the depositors.

The minimum balance to be maintained in an ordinary savings bank account varies from bank to bank. It is less in case of public sector banks and comparatively higher in case of private banks. There are some banks which offer no frills account.

What is a current account?

Current account is an account with minimum amount of boundaries. Most individuals do not need this account, one need this account only if he makes a number of deposits and withdrawals in a single day and many of the deposits are drawn on outstation banks. Banks accept deposits in current account and allow unlimited withdrawals subject to a minimum balance. This minimum balance differs from Bank to Bank. Banks will not pay any interest on a current account. On the other hand, banks charge service charges, on such accounts. Opening of a current account is meant for a business enterprise or high worth individuals who deal with a lot of third party cheques, drafts etc. or who may at times need to borrow money from the Bank against some security.

Current accounts are mainly used by businessmen and are not generally used for the purpose of investment. These deposits are the most liquid deposits and there are no limits for number of transactions or the amount of transactions in a day. Most of the current account are firm / company accounts. Cheque book facility is provided in this type of accounts and the account holder can deposit all types of the cheques and drafts in their name or endorsed in their favour by third parties.

According to Reserve Bank, Current account is "a form of demand deposit where from withdrawals are allowed any number of times depending upon the balance in the account or up to a particular agreed amount and shall also be deemed to include other deposit accounts that are neither savings deposit nor term deposit."
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Answer 2

Current account :-

• They facilitate regular business transactions .

• They don't have limit on monthly transactions .

• There is need to maintain a relatively higher minimum balance .

• It caters to business organisations .

• It doesn't provide any interest .

Savings account :-

• They are suitable to build emergency funds .

• They have limit on monthly transactions .

• There isn't any need to maintain a relatively higher minimum balance .

• Its suitable for an individual .

• It offers interest rates ranging between 0.50 % to 7.50 % .