Savings, current, term and recurring deposits â what actually differs between them, how nomination and dormancy rules work, and how much of your money is insured if a bank fails.
A deposit account is money placed with a bank for safekeeping, transactions, or to earn interest. Indian banks offer four principal types â Savings, Current, Fixed/Term Deposit (FD), and Recurring Deposit (RD) â each designed around a different customer need.
For individuals to park surplus funds while earning modest interest, with unlimited (or minimally restricted) withdrawals â the default account for salaried and retail customers.
For businesses and traders needing frequent transactions; pays no interest but offers overdraft facilities and higher transaction limits.
A lump sum locked in for a fixed tenure (7 days to 10 years) at a pre-agreed, generally higher, interest rate â premature withdrawal usually attracts a penalty.
A fixed monthly instalment over a chosen tenure, earning FD-like interest â a disciplined way to build savings from regular income.
| Feature | Savings | Current | FD | RD |
|---|---|---|---|---|
| Interest | Low, variable | None | Fixed, highest | Fixed, FD-like |
| Liquidity | High | Highest | Locked-in (penalty on exit) | Locked-in |
| Typical User | Individuals | Businesses/traders | Savers seeking fixed returns | Regular small savers |
| Overdraft | Rare | Common | Loan against FD available | Loan against RD available |
Nomination lets a depositor designate who receives the balance on death, without needing a Will or succession certificate for that account. Following the 2025 amendment to the Banking Laws, depositors can now nominate up to 4 nominees per account (previously only 1), and choose between:
An account is classified Inactive if there are no customer-induced transactions for 12 months, and Dormant if this extends to 24 months. Dormant accounts face restricted online access and require branch verification to reactivate â a safeguard against unauthorised transactions on accounts the genuine owner has stopped monitoring. Unclaimed deposits (inactive for 10+ years) are transferred to the RBI's Depositor Education and Awareness (DEA) Fund, though the depositor/nominee can still claim them from the bank at any time with interest.
Banks deduct Tax Deducted at Source (TDS) on FD/RD interest once it crosses the prescribed annual threshold (higher for senior citizens) under Section 194A of the Income-tax Act. Depositors whose total income is below the taxable limit can avoid TDS by submitting Form 15G (below 60 years) or Form 15H (senior citizens) declaring no tax liability.
Deposits with every commercial bank (and most cooperative banks) are insured by the Deposit Insurance and Credit Guarantee Corporation (DICGC), a wholly-owned RBI subsidiary, up to âš5 lakh per depositor per bank (covering principal + interest, combined across all accounts held in the same capacity at that bank). This is why spreading large deposits across different banks â rather than one bank alone â matters for genuinely risk-free coverage.
Related deep-dive: See the JAIIB notes on Deposit Accounts and Retail Liability Products for exam-focused MCQs.
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