Bank Account Questions and Answers [With PDF]

Which bank account should a shopkeeper open? What about a salaried employee, a student or someone saving for a goal? Choosing the right bank account saves money and effort. This chapter explains what a bank account is, how to open and close one, the main types (current, savings, fixed, recurring and special accounts), the documents banks give you (passbook, statement, cheque book), the KYC form, and how to pick the best account. Here are 25 important questions with clear answers, a comparison table and worked examples, ready for exams, vivas and job interviews.

This is Chapter 4, the last chapter of our Banking course. It follows Commercial Bank.

Meaning and Procedure

Q1. What is a bank account?

A bank account is an account opened in a customer’s name at a bank. It records the money the customer deposits and withdraws, and gives access to banking services.

Q2. What is the importance of opening a bank account?

• It keeps money safe.
• It builds a habit of saving.
• It can earn income (interest or profit) with very little risk.
• It helps form capital for the country.
• It contributes to economic growth.
• It gives access to banking services such as transfers, cards and loans.

Q3. What is the procedure for opening a current or savings account?

1. Collect the account opening form.
2. Fill it in.
3. Arrange an introduction (a reference from an existing customer, where the bank requires it).
4. Attach the necessary documents: photographs, national ID, tax ID (TIN), passport and, for businesses, the trade licence.
5. Submit the form and complete the KYC form.
6. Sign the specimen signature card.
7. Fill in a deposit slip and make the opening deposit.
8. Receive the cheque book and debit card.

Q4. What is the procedure for opening a fixed deposit account?

1. Collect and fill in the application form.
2. Submit it with the required documents.
3. Deposit the amount and receive the fixed deposit receipt.

Q5. What are the rules for closing a bank account?

To close a current or savings account, the holder applies in writing and hands over the passbook and unused cheque leaves. The bank pays out the balance after deducting any closing charges and marks the account as closed in its records. Once closed, no further transactions are allowed.

Types of Accounts

Q6. What are the types of bank accounts?

1. Current account
2. Savings account
3. Fixed deposit account
4. Special accounts: pension (deposit scheme), insurance savings, recurring deposit, loan, non-resident foreign currency accounts and others

Q7. What is a current account?

An account for people and businesses that make many transactions. The holder can deposit and withdraw as often as needed during working hours, and the bank usually pays no interest on it.

Q8. What is a special current account?

A variation of the current account that allows deposits and withdrawals at any time, but pays a small amount of interest or profit, usually if the balance stays above a minimum level.

Q9. What are the advantages of a current account?

• Unlimited deposits and withdrawals during the working day.
• The facility of an overdraft or cash credit, subject to the bank’s approval.
• Convenient money transfer, cheque collection and bill payment services.
• A good banking record helps obtain loans and credit.

Q10. What is a savings account?

An account for saving money. The holder can deposit as often as they wish, but the number or amount of withdrawals is limited by the bank, and the bank pays interest or profit on the balance.

Q11. What are the advantages of a savings account?

• It can be opened with a small amount, so anyone can open one.
• It encourages the habit of saving, which helps the country form capital.
• It pays interest or profit on the money.
• Even an ordinary person gets banking facilities such as a debit card and money transfers.

Q12. What is a fixed deposit account?

An account in which money is deposited for a fixed period (such as 6 months, 1 year or 5 years) to earn a higher interest or profit. The bank does not issue a cheque book. If the money is withdrawn before the end of the term, the bank may reduce the interest or charge a penalty.

Q13. What are the advantages of a fixed deposit account?

• It earns higher interest or profit than savings accounts.
• The customer can often get a loan against the deposit.
• It helps form capital.

Example: 100,000 placed for 2 years at 6% simple interest earns 100,000 x 0.06 x 2 = 12,000. The maturity amount is 112,000.

Q14. What is a recurring deposit account?

An account in which the customer deposits a fixed amount every month for a fixed period, and receives the total of all instalments plus interest at the end of the term. It suits people who save regularly from a monthly income.

Example (simple-interest approximation): A customer deposits 5,000 a month for 12 months at 6%. Total deposits are 60,000. Interest = 5,000 x 0.06 x (12 x 13 / 2) / 12 = 1,950, so the maturity amount is about 61,950.

Q15. What is a pension (special savings) account?

A scheme in which the customer deposits a fixed amount every month for a set number of years, and at the end the bank pays a large lump sum (or, in some schemes, a regular pension). It helps people build funds for retirement or big expenses.

Q16. What is an insurance savings account?

An account that gives both savings and a basic insurance cover. The depositor earns interest on the savings, and the family receives an insurance benefit if the depositor dies within the term.

Q17. How do current, savings and fixed accounts compare?

Banking Documents

Q18. What is a specimen signature card?

A card on which the account holder signs at the time of opening the account. The bank keeps it and compares the signature on every cheque and instruction with it, to check that it is genuine.

Q19. What are a bank passbook and a bank statement?

• Passbook: a small book the bank gives to a savings account holder, in which the bank writes the deposits, withdrawals and balance.
• Bank statement: a printout or PDF that the bank sends to the customer, showing every transaction in a period and the closing balance.

Q20. What are a deposit slip and a cheque book?

A deposit slip (or deposit receipt) is the form the customer fills in when putting money into the account. A cheque book is a book of cheque leaves that the bank gives the customer to withdraw money or pay others. A cheque is valid only if it is dated, shows the amount in words and figures, names the payee, and is signed by the account holder as per the specimen signature.

Q21. What is the KYC form?

KYC stands for Know Your Customer. The account holder fills in this form, with their identity and personal details, along with the application form at the time of opening an account. The bank checks and signs the information. KYC helps prevent fraud and money laundering.

Choosing the Right Account

Q22. What factors should you consider when choosing a bank account?

• Nature of the client: an individual, a business, a student or a retired person.
• Number and size of transactions: frequent or occasional.
• Services offered: cards, online banking, transfers.
• Interest or profit rate.
• Loan and overdraft facilities.
• Idle or surplus money that can be locked in for higher returns.
• Safety of the bank and of the money.

Q23. Which account is best for a businessman, and why?

A current account. A businessman makes many deposits, withdrawals and payments every day, and needs unlimited transactions, a cheque book for paying suppliers, and facilities such as overdraft or cash credit when cash runs short. These facilities are not available in the same way with other types of accounts.

Q24. Which account is best for a salaried person, and why?

A savings account. A salaried person receives a fixed salary at the end of each month, deposits it, and spends it as needed. A savings account lets the salary be received easily, encourages saving, pays interest on the balance and gives banking benefits such as a debit card.

Q25. What are joint and minor accounts?

• Joint account: an account opened by two or more people (such as spouses or business partners), who all can operate it, as agreed (either-or-survivor or jointly).
• Minor account: an account for a child under 18, operated by a parent or guardian on the child’s behalf.

Quick Revision Points

• Current account: unlimited transactions, usually no interest, for businesses.
• Savings account: for saving, pays interest, limited withdrawals.
• Fixed deposit: money locked for a term, higher interest, no cheque book.
• Recurring deposit: fixed monthly instalments for a fixed period.
• KYC = Know Your Customer. A cheque must be signed by the account holder.

You have now finished the Banking course. Test yourself with the chapter quiz below, then move on to Insurance.