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Different Kind of Accounts in Use in Banking WorldWritten By Ashu Insan on Tuesday, October 8, 2013 | 11:24 AM

(1) 'Nostro Account'A bank account held in a foreign country by a domestic bank, denominated in the currency of thatcountry. Nostro accounts are used to facilitate settlement of foreign exchange and tradetransactions. The term is derived from the Latin word for "ours." Conversely, accounts that areheld by the domestic bank in its home country for foreign banks are called vostro accounts,derived from the Latin word for "yours."

For example, a U.S. bank may have nostro accounts with one or more Canadian banks. Theseaccounts will be denominated in Canadian dollars, which enables efficient settlement oftransactions that are Canadian dollar denominated. Nostro accounts also minimize the exposureof the U.S. bank to undue exchange rate risk.

(2) 'Vostro Account'The account that a correspondent bank, usually located in the United States or United Kingdom,holds on behalf of a foreign bank. A vostro account is one in which the domestic bank (from thepoint of view of the currency in which the account is held) acts as custodian or manages theaccount of a foreign counterpart. Also known as a loro account.

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For instance, if a Spanish life insurance company approaches a U.S. bank to manage funds in anaccount for the Spanish life insurer's behalf, the account would be deemed a vostro account ofthe insurer.

The term vostro is Latin for "yours," thus when translated literally, it means "your account."

(3) NRE Account:In this account rupee denominations can be maintained. The account can opened in the names oftwo or more non-resident individuals provided all the account holders are persons of Indiannationality or origin. Amount held in the NRE account are freely repatriable and you cannot sendmoney by any other means except as remittance from abroad or transfer from another NREaccount.NRE account may be in the form of savings, current, recurring or fixed deposit accounts. Suchaccounts can be opened only by the non-resident himself and not through the holder of the powerof attorney.TaxationAccrued interest income and balances held in NRE accounts are exempt from Income tax andWealth tax, respectivelyCurrencyAccount holder is exposed to the fluctuations in the value of INR.Interest ratesBanks are free to determine the interest rates of saving's and term deposits of maturity of oneyear and above.Interest rates offered by banks on NRE deposits cannot be higher than those offered by them oncomparable domestic rupee deposits.

(4) NRO Account:NRO accounts may be opened / maintained also in the form of rupee denomination could be in theform of current, savings, recurring or fixed deposit accounts. The account can be held jointly byresidents. You can transfer money into an NRO account from any account - even other individualsresiding in india can transfer money into an NRI's NRO account.RepatriationNot repatriable except for the following:i) current incomeii) up to USD 1 (one) million per financial year (April-March), for any bonafide purpose, out of thebalances in the account, e.g., sale proceeds of assets in India acquired by way of purchase/inheritance / legacy inclusive of assets acquired out of settlement subject to certain conditions.CurrencyAccount holder is exposed to the fluctuations, in the value of INR to the extent of interest amount.Interest ratesBanks are free to determine their interest rates on savings deposits under Ordinary Non-Resident(NRO) Accounts.

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However, interest rates offered by banks on NRO deposits cannot be higher than those offered bythem on comparable domestic rupee deposits. Tax is deducted at source in NRO accounts, unlikeNRE accounts.However, funds from NRO to NRE accounts can be transferred, vice- versa.

(5) 'Suspense Account'In accounting, the section of a company's books where unclassified debits and credits arerecorded. The suspense account temporarily holds unclassified transactions while a decision isbeing made as to their classification. Transactions in the suspense account will still appear in thegeneral ledger, giving the company an accurate indication of how much money it has.

In investing, a suspense account is a brokerage account where an investor places cash or short-term securities temporarily while deciding where to invest them for a longer term.

Suppose a doctor's office has two patients named Bob Smith, each with an outstanding balance of$100. One day at lunch, one of the Bobs stops by the office to pay his bill and leaves $100 cashand his name with the receptionist. Unfortunately, the receptionist does not ask for his address oraccount number and when the office bookkeeper returns from lunch, she doesn't know which BobSmith has paid his bill. The bookkeeper would classify the transaction in the suspense accountuntil she could determine which patient to attribute the $100 to.

(6) 'Call Deposit Account'A bank account for investment funds that offers the advantages of both a savings and a checkingaccount. A call deposit account, like a checking account, has no fixed deposit period, providesinstant access to funds and allows unlimited withdrawals and deposits. Like a savings account, acall deposit account pays interest. The rate of interest a call deposit account pays depends on theamount of money in the account, a system commonly referred to as banded interest rates. Also,different currencies may earn different interest rates. Depositors may have to meet a minimumbalance threshold before they earn any interest.

Call deposit accounts allow investors to deposit and withdraw funds in several currencies, whichcommonly include the U.S. dollar, the euro and the British pound. This flexibility reduces investors'exposure to foreign exchange expenses and currency risk. Call deposit accounts often haveminimum deposit requirements to establish an account and may have minimum daily balancerequirements, too.

(7) 'Margin Account'A brokerage account in which the broker lends the customer cash to purchase securities. Theloan in the account is collateralized by the securities and cash. If the value of the stock dropssufficiently, the account holder will be required to deposit more cash or sell a portion of the stock.In a margin account, you are investing with your broker's money. By using leverage in such a way,you magnify both gains and losses.

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(8) Money Market Account. This type of bank account pays interest at a higher rate than the ratepaid on interest-bearing savings and checking accounts. Often, money market accounts impose aminimum balance for the account to start earning interest. The minimum required balance on amoney market account is usually higher than that imposed on a checking or savings account. Witha money market account, withdrawals are limited to six per month. No more than three of thesewithdrawals can be by check.

(9) Time Deposits, frequently referred to as certificates of deposit (CDs), are bank accounts thatrequire the account holder to make a deposit and agree to leave funds in the account for aspecific amount of time. In return for this agreement, the financial institution pays interest to theaccount. Often, the interest paid on a CD is higher that the rate paid on other types of bankaccount. The account holder is required to keep his or her money in the account until thespecified term is over. However, some financial institutions allow account holders to withdrawinterest, without affecting the principal. In some cases, account holders may be allowed towithdraw their principal funds before their CD matures, but a penalty is typically charged.

(10) No-Frills Bank Accounts. A no-frills bank account may allow the holder to pay bills and cashchecks without paying the high fees associated with completing such transactions without anaccount. An account of this type will likely allow for only a limited number of checks, deposits, andwithdrawals to be processed in any given month. In most cases, interest is not paid on a no-frillsbank account.

(11) Checking Account is a bank account that uses checks as the primary instrument forwithdrawing money. With a checking account, you can make purchases, pay bills, and give or loanmoney to anyone you choose. You can also use a check to transfer money from your checkingaccount to a bank account at a different financial institution. Usually, financial institutions allowaccount holders to make as many deposits and withdrawals as they wish. Many allow accountholders to make withdrawals and deposits through automatic teller machines (ATM) as well.

(12) 'Negotiable Order of Withdrawal (NOW) Account'An interest-earning bank account with which the customer is permitted to write drafts againstmoney held on deposit. Also known as a "NOW account".

Typically commercial banks, mutual-savings banks and savings-and-loan associations can offerthis type of account to individuals, some nonprofit organizations and certain governmental units.

(13) Definition of 'Bank Trust Custodial Account'A type of Individual Retirement Account (IRA) allowed by the Employee Retirement IncomeSecurity Act of 1974 (ERISA) in which contributions are paid into the bank's interest-bearingfinancial instruments or a self-directed account. The difference between a self directed accountand the bank's interest bearing financial instrument is that the investor is in charge of investmentdecisions. Self-directed accounts are usually set up by a brokerage and the investor is chargedan amount above trading costs.

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ERISA is federal legislation enacted to ensure that pension/retirement plans of employers are fairand secure. It is the law that established rules and regulations to govern private pension plans,including vesting requirements, funding mechanisms, and general plan design and descriptions.

(14) Definition of 'Official Settlement Account'A type of account used in balance of payments accounting to keep track of central banks' reserveasset transactions with each other. The official settlement account keeps track of transactionsinvolving gold, foreign exchange reserves, bank deposits and special drawing rights (SDRs).Essentially, this account keeps track of transactions related to international assets.The other account types used in balance of payments accounting are the current account and thecapital account. The current account keeps a record of a country's imports and exports of goods,services, income and transfers, and whether the country is a net creditor or net debtor. Thecapital account records the change in foreign and domestic ownership of assets.

(15) FCNRFCNR deposits stands for Foreign Currency Non-Repatriable account deposits. This is a FixedDeposit Foreign Currency account and not a savings account. Deposits in this account can bemade in any of the major currencies like US Dollar, UK Pound, Canadian Dollar, Deutsche Mark,Japanese Yen and Euro.

(16) Non-Resident AccountsNon-Resident bank accounts are those, which are maintained by Indian nationals and Persons ofIndian origin resident abroad, foreign nationals and foreign companies in India. Bank branchescan open ordinary non-resident accounts in the names of private individuals provided initialdeposits for opening the accounts are received from abroad in an approved manner or the initialamount is tendered in foreign currency while on a visit to India or transfer of funds from theexisting non-resident account of the same person.------------------------------------------------------------

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