Deposit Accounts

📊 Deposit Accounts — At a Glance (2026)

1 Savings Account

A Savings Account is designed for individuals to save money for non-commercial purposes. It pays interest on the balance and permits withdrawals on demand. Since interest rates on savings accounts were deregulated (2011), banks are free to set their own rates. The PMJDY zero-balance variant (see our Government Schemes guide) is a special category requiring no minimum balance.

2 Current Account

A Current Account is designed for businesses and entities needing frequent, unrestricted transactions. It pays no interest, but permits an unlimited number of withdrawals/deposits. Banks typically require a higher minimum/quarterly average balance and may levy charges for non-maintenance.

3 Term Deposit

A Term (Fixed) Deposit involves depositing a lump sum for a fixed tenure at a fixed (occasionally floating) interest rate — typically the highest rate among deposit products. Premature withdrawal usually attracts a penalty (reduced interest rate). Senior citizens commonly get an additional 0.25%-0.50% interest over the standard rate.

4 Recurring Deposit

A Recurring Deposit (RD) requires a fixed monthly instalment over a fixed tenure, earning interest comparable to a term deposit of matching tenure — a disciplined way for regular savers to build a lump sum over time.

5 Minor Account

Under Section 11 of the Indian Contract Act, 1872, a minor (under 18) cannot enter into a valid contract — a contract with a minor is void ab initio (Mohori Bibee v. Dharmodas Ghose, 1903). Despite this, banking practice permits minor's accounts through practical safeguards:

• Guardian-operated: for younger minors, the natural or legal guardian operates the account on the minor's behalf.
• Minor-operated: minors above a bank-specified age (commonly 10+) may independently operate a savings account (not an overdraft/credit facility), at the bank's discretion, if literate.
• On attaining majority (18, or 21 if a court-appointed guardian exists), fresh operating instructions and signature are required, converting it to a major's account.

6 Joint Account

A Joint Account is opened by two or more persons, with operating instructions specified at account opening — "Jointly" (all signatures required), "Either or Survivor," "Former or Survivor," or "Anyone or Survivor(s)" for more than two holders.

7 Either or Survivor

In an "Either or Survivor" account (2 holders), either holder can operate the account independently while both are alive. On the death of one, the survivor can operate and claim the balance without needing consent from the deceased's legal heirs — this is a valid contractual mandate, not requiring a succession certificate.

8 Former or Survivor

In a "Former or Survivor" account, only the Former (first-named) holder can operate the account while both are alive. The "Survivor" (second-named) gains operating rights only after the Former's death. If the second-named holder dies first, the Former simply continues operating as before.

9 Mandate

A Mandate is a written authority given by an account holder to another person to operate the account on their behalf — without transferring ownership of the deposit. Key features:

• Revocable at will by the account holder.
• Automatically ceases on the death, insolvency, or insanity of the account holder (mandate-giver).
• A mandate holder cannot: close the account, change operating instructions, add/change a nominee, or open a new account.

10 Nomination

Nomination, governed by the Banking Companies (Nomination) Rules, 1985 under Section 45ZA of the Banking Regulation Act, 1949, allows an account holder to designate someone to receive the balance in the event of death — providing a valid discharge to the bank without insisting on legal heirship proof.

Simultaneous vs Successive Nomination

Payment to a nominee is a valid discharge for the bank, but the nominee holds the amount as a trustee for the legal heirs under succession law — the bank's payment itself remains fully protected either way.

11 Dormant / Inoperative Accounts

Per RBI's revised guidelines (circular dated 1 January 2024, effective 1 April 2024), an account is classified "inoperative" if there is no customer-initiated transaction for 24 consecutive months.

• Customer-initiated transactions (deposits, withdrawals, transfers, positive KYC response) prevent dormancy; bank-initiated entries (interest credit, service charges) do not.
• Banks must conduct an annual review of accounts with no transactions for over 1 year, and alert the customer before classification.
• No penal charges can be levied for non-maintenance of minimum balance once an account is classified inoperative.
• Reactivation requires fresh KYC — a 2025 draft circular proposes enabling this at any branch (not just the home branch) and via Video-KYC (V-CIP).

12 Unclaimed Deposits

Any deposit balance unoperated/unclaimed for 10 years or more must be transferred by the bank, along with accrued interest, to RBI's Depositor Education and Awareness Fund (DEAF) — established under Section 26A of the Banking Regulation Act, 1949.

• Depositors/legal heirs can still claim the amount anytime, with the bank refunding it and separately claiming reimbursement from DEAF.
• Interest payable on such claimed amounts: currently 3.0% simple interest per annum.
• The UDGAM portal (launched by RBI) lets the public search for unclaimed deposits across multiple banks in one place.

13 Deceased Claims

When an account holder dies, the bank must settle the claim to the balance based on how the account was structured:

14 Settlement of Deceased Accounts

RBI has consistently pushed banks to adopt simplified, customer-friendly procedures for settling deceased accounts, to avoid undue hardship on grieving families:

• Sole account with nomination: straightforward payment to the nominee against a death certificate.
• Sole account without nomination: banks apply board-approved policies — smaller amounts settled via indemnity-cum-affidavit from legal heirs; larger amounts require a succession certificate/legal heirship certificate/probate.
• Joint account, "Either/Anyone or Survivor": survivor(s) can operate/claim directly, without needing legal heirship proof for the deceased's share.
• Joint account, "Jointly" (all signatures required): generally needs the legal representative of the deceased plus the surviving holder(s) to jointly instruct the bank.

✓ Key Takeaways

• Savings = personal, interest-bearing; Current = business, no interest, unlimited transactions; Term Deposit = lump sum, fixed tenure; RD = fixed monthly instalment.
• A minor's contract is void ab initio, but banks permit minor accounts through guardian-operation or age-based independent operation of savings accounts.
• Either or Survivor = anyone operates now; Former or Survivor = only the first-named operates until death.
• A Mandate only authorises operation — never ownership — and ceases automatically on the account holder's death/insolvency/insanity.
• Nomination now allows up to 4 nominees (Banking Laws Amendment Act, 2025, effective 1 Nov 2025) — simultaneous (% shares) or successive for deposits; successive-only for lockers.
• Accounts turn "inoperative" after 24 months of no customer-initiated transaction; balances unclaimed for 10+ years transfer to RBI's DEAF (currently ₹78,213 crore, earning 3% p.a. on reclaim).
• RBI's Accelerated Payout Scheme runs 1 Oct 2025 to 30 Sept 2026, pushing banks to proactively settle dormant/unclaimed money.
• Deceased-account settlement is fastest with nomination/survivorship, and requires legal representation only in their absence.

📝 Top 50 JAIIB-Style MCQs on Deposit Accounts

Test your understanding with these 50 practice MCQs, closely modelled on the pattern expected in the upcoming JAIIB PPB exam — including combination-answer questions and the brand-new 4-nominee rule. Each question has 5 options — the correct answer is hidden by default; tap "Show Answer" to reveal it along with a short explanation.