NISM Series SEBI-ICE · Chapter 4: Savings Related Products

L1 · Foundation

Foundation — Banks, deposits, digital payments and your liability

Why money belongs in a bank, deposit insurance, KYC, the five types of bank deposit, NEFT/RTGS/IMPS/UPI, payment banks and small finance banks, credit versus debit cards, the customer liability rules for unauthorised transactions, and the role of the RBI.

26 min read · Worth 9% of the paper · Written from pages 17–22 of the official NISM workbook · Updated 18 September 2026

Chapter 4 — Savings Related Products

Chapter 3 gave you the method. Chapter 4 starts the products, and it starts where every Indian household starts — with a bank.

A. Why keep money in a bank?

The chapter argues by listing the drawbacks of cash at home:

Drawback	Why it matters
Unsafe	"Money can be stolen or lost due to natural calamities"
Loss of growth opportunities	"Loss of interest income"
No / low credit eligibility	"Deposit in banks creates eligibility for taking loans"

The third is the one people underestimate. A household that has kept ₹2 lakh at home for five years has no record of it anywhere — and when it needs a loan, there is nothing to show. The same ₹2 lakh in a bank builds a visible relationship and a borrowing capacity.

B. Banking

And the character of a bank deposit:

Map that onto Chapter 3's three pillars. A bank deposit scores high on safety and high on liquidity, and pays for both by scoring low on return. That is not a defect; it is the product doing its job, and it is exactly why emergency money belongs here and fourteen-year money does not.

The loan-against-FD point is worth remembering in practice: breaking a fixed deposit for a short need is often the wrong move when you can borrow 75–90% against it and leave the deposit running.

Deposit insurance

Three words carry the whole rule: per customer, per bank. The cover is not per account and not per deposit. Ten accounts in one bank share one ₹5 lakh cover; one account each in three banks gets three covers.

The chapter adds: "For complete details on the scheme, one can refer the website of Reserve Bank of India, from time to time."

C. Account opening — KYC

The documents generally accepted:

Requirement	Examples given
Photograph	—
Proof of identity	Copy of PAN card, Aadhaar card, etc.
Proof of address	Copy of electricity bill, driving licence, passport, Aadhaar card

Note that Aadhaar appears in both lists — it can serve as proof of identity and of address.

D. Types of bank accounts

This is the table the exam draws on most heavily.

Savings Bank (SB) Account

Low interest, however, highly liquid.
Facilitates payment through ATMs.
No TDS on interest on SB account balance, but taxable in the hands of the depositor. — read this twice; no tax is deducted, but the income is still taxable.
Can be opened in single or joint names; a joint account may be operated by any one holder or jointly.
Minors of any age can open an SB account through their natural or legally appointed guardian.
Minors above 10 years can also avail internet banking, ATM/debit card and cheque book facilities.

Basic Savings Bank Deposit Account (BSBDA)

Introduced to promote financial inclusion.
Zero balance savings account, without any requirement of an initial deposit, for individuals and also minors through their guardian.
Relaxed conditions for the number of deposits and withdrawals in a month.
ATM card and passbook issued free of charge.
A BSBDA holder is not eligible to open any other savings bank deposit account in that bank.

That last bullet is a favourite examination point. You may hold a BSBDA, or an ordinary savings account, but not both in the same bank.

Fixed Deposit (FD) Account

Placing funds with the bank for a fixed term at a certain interest rate.
Interest accrued or earned is subject to TDS beyond a stipulated amount.
Senior citizens may get extra benefits on the interest rate.
Tenure and rate of interest vary from bank to bank.

Recurring Deposit (RD) Account

A fixed amount is deposited at monthly intervals for a predetermined term.
Earns higher interest than a savings bank account.
TDS applicable on interest beyond a stipulated amount.
Senior citizens may get extra benefits.
Tenure and rate vary from bank to bank.

An RD is the banking system's answer to Chapter 3's Income − Savings = Expenditure: a fixed sum leaves the account every month before it can be spent.

Special Bank Term Deposit Scheme

A tax savings scheme available with banks.
Relief under Section 80C of the Income Tax Act, 1961.
Term deposit with a 5 year lock-in period.
No premature withdrawal / loan allowed.

Contrast this with an ordinary FD, where you can usually break the deposit or borrow 75–90% against it. The tax relief is bought with the loss of both options.

E. Digital banking

The four transfer modes, with the distinguishing features:

Mode	Key features
NEFT (National Electronic Fund Transfer)	Transfer from one bank account to another. No restrictions on the minimum or maximum amount. Uses account number and IFSC. Charges differ from bank to bank. Can be initiated any time during the day and takes a few hours to be credited.
RTGS (Real Time Gross Settlement)	Transfer to a different account of another bank on a real time basis. Used to make high value transactions. Uses account number and IFSC. Initiated during the specified period on a working day and completed instantly on a real time basis.
IMPS (Immediate Payment Service)	Instant fund transfer. Through internet banking you need account number and IFSC; through mobile banking you need the beneficiary's MMID — Mobile Money Identifier, a 7 digit number issued by the bank.
UPI (Unified Payment Interface)	Instant transfer through any smart phone using a VPA (Virtual Payment Address). 24 × 7 fund transfer on a real time basis. Download a UPI-enabled bank app and log in using bank details.

IFSC is the Indian Financial System Code, described as "a unique code assigned to each bank branch."

The exam-relevant contrasts: NEFT has no minimum or maximum; RTGS is for high value; IMPS uses MMID on mobile; UPI uses a VPA and runs 24 × 7.

The chapter directs you to www.rbi.org.in and www.npci.org.in for complete details.

UPI is worth a word of real-world context. When this booklet was published in November 2020, UPI was growing fast; it has since become the rail on which the great majority of India's retail digital payments run, from a ₹10 tea to a ₹50,000 transfer. Its convenience is also why Chapter 11's frauds increasingly arrive as a UPI "collect" request rather than as a man with a receipt book.

New categories of banks and Business Correspondents

Title	Key features
Payment Bank	Provides savings/current account facilities. Can accept demand deposits but NOT recurring or fixed deposits. Can issue ATM/debit cards but NOT credit cards. Cannot give loans or advances. Offers payment and remittance services through various channels.
Small Finance Bank	Takes small deposits and disburses small loans. An instrument to save funds primarily for unserved and underserved sections of the population. Extends small loans to small business units, micro and small enterprises, small and marginal farmers and entities in the unorganized sectors.
Business Correspondent	A representative of a bank who goes to customers, usually in remote locations or villages. Can open bank accounts, take deposits, transfer funds, collect loan deposits, disburse small value credit and collect payments/fees.

Learn the payment bank's three prohibitions as a set: no fixed or recurring deposits, no credit cards, no loans or advances.

F. Digital payments — do's and don'ts

Do:

Use a password on your computer, laptop and mobile; change passwords and security settings regularly.
Always visit your bank's secure internet banking website directly; avoid internet banking on unsecured Wi-Fi at railway stations, airports and cybercafés.
Log out immediately after completing a transaction and before closing the window.
Update the mobile banking app when a new version is released, and keep the phone's security software current.
If you suspect unauthorised transactions, report to your bank immediately or at least within three working days, so that the complaint is addressed in your favour.

Don't:

Never save your mobile banking login ID and password on the phone — memorise it, or write it somewhere safe and inaccessible.
Never leave your handset unattended while logged into a banking app or mid-transaction.
Never ignore your account balance statements and transaction history.
Don't leave your PC or laptop lying around, or trust a stranger to use it.
Never download apps from untrustworthy and unreliable sources.

That last one has become the single most important line in the chapter. A large share of current digital fraud in India begins with a victim installing an app from a link sent over WhatsApp, or granting screen-sharing access to a caller claiming to be from a bank or a courier company.

G. Credit cards and debit cards

The comparison table:

Particulars	Credit Card	Debit Card
Source of funds	Lending bank provides the credit facility	Linked to one's own savings/current account maintained with the same bank
Interest	If outstanding amount is not paid on time, interest is levied	Not applicable
Credit history	Relevant for issuing a credit card	Not relevant for issuance
Relationship with issuer	No compulsion to have an account with the issuing bank	Having an account with the issuing bank is a pre-requisite

The last row surprises people. You can hold a credit card from a bank where you have no account; you cannot hold that bank's debit card without one.

Precautions with an ATM card

Change the PIN immediately when the card is received.
Don't write the PIN anywhere. Memorise it. Don't disclose it to any third person.
Preferably use an ATM within bank premises or premises manned 24×7 by a security guard. Use it personally.
"Bank has NO LIABILITY in case the ATM card has been handed over for transaction to ANY OTHER PERSON except the account holder."
While transacting online, use the virtual keyboard.
Register for SMS alerts — though "banks may charge customers for providing SMS or e-mail alerts."
Change your PIN as often as convenient. If the card is lost, immediately inform the bank. Do not allow anyone to access or use your card.

H. Customer liability for unauthorised banking transactions

This section is short, precise and heavily examined. RBI has specified three situations:

Situation	Customer's liability
Fraud, contributory negligence or deficiency on the part of the bank	No liability
Neither customer nor bank at fault — the problem lies elsewhere in the system	No liability, PROVIDED the customer notifies the bank within THREE DAYS of receiving an alert from the bank
Fraud on account of the negligence of the customer	The entire loss, UNTIL THE DATE OF REPORTING, is borne by the customer

And: "the bank shall credit the amount involved in such transaction to the customer's account within a specified time period."

Read the third row carefully, because it contains both bad news and good. If you were careless — you shared an OTP, you wrote the PIN on the card — you bear the loss. But only until the date you report it. Everything after the report is the bank's. That makes reporting an urgent act even when you believe the fault was yours.

The enabling machinery:

That is why the alert SMS you ignore is the most valuable message your bank sends you — the three-day clock starts when it arrives.

I. Reserve Bank of India

What it does, in the chapter's own words:

"Uses MONETARY POLICY to create financial stability in India", and is "charged with regulating the country's CURRENCY AND CREDIT SYSTEMS."
"Conducts CONSOLIDATED SUPERVISION of the financial sector in India, which is made up of COMMERCIAL BANKS, FINANCIAL INSTITUTIONS AND NON-BANKING FINANCE COMPANIES."
"Formulates, implements and monitors India's monetary policy."
Management objective: "maintain PRICE STABILITY and ensure that CREDIT IS FLOWING TO PRODUCTIVE ECONOMIC SECTORS."
"Acts as a REGULATOR AND SUPERVISOR of the overall banking system."
"Banker to the GOVERNMENT OF INDIA."
"LENDER OF LAST RESORT for all commercial banks."

Keep RBI and SEBI apart in your mind from here on. RBI regulates banks, currency, credit and NBFCs. SEBI regulates the securities market. Chapter 14 deals with SEBI; Chapters 12 and 13 will show you which grievance goes where.

J and K. Cross-references

The chapter ends by pointing elsewhere: grievances about banking products go to Chapter 12, and government schemes in the banking industry are in Chapter 9.

Think of it like this

The almirah at home fails three tests at once

Cash in a steel almirah feels like the safest thing in the world. The chapter lists three reasons it is not:

Unsafe — "money can be stolen or lost due to natural calamities". A theft, a fire, a flood, and it is simply gone. There is no claim, no record, no recovery.
Loss of growth opportunities — "loss of interest income". Money in the almirah earns nothing while prices rise around it, which Chapter 2 showed is a guaranteed loss of purchasing power.
No or low credit eligibility — "deposit in banks creates eligibility for taking loans".

That third one is the quiet one. A family that keeps ₹2 lakh at home for five years has no record of it anywhere. When it needs to borrow — for a shop, for a hospital, for a house — it has nothing to show. The same ₹2 lakh in a bank builds a visible relationship, a statement, and a borrowing capacity.

The almirah protects the notes. The bank protects the notes, pays you for them, and vouches for you.

Five lakh per customer, per bank — not per account

Deposit insurance covers "up to a limit of ₹5 lakhs PER CUSTOMER IN THAT PARTICULAR BANK." Three words, and almost everybody misreads at least one.

Picture a retired man with ₹14 lakh at one bank, spread across a savings account, two fixed deposits and a recurring deposit. Four accounts. He assumes he has four covers.

He has one. Add the four balances together, and the cover stops at ₹5 lakh.

Now picture the same ₹14 lakh as ₹5 lakh at one bank, ₹5 lakh at a second and ₹4 lakh at a third. Every rupee is covered, because each bank brings its own limit.

Nothing else about the deposits changed — not the rates, not the tenure, not the paperwork. Only the number of banks. And the cover only ever matters on the one day you hope never comes: "even in case of a failure of a bank, depositors are assured that the Government will step in."

No TDS is not the same as no tax

The savings bank account entry hides a trap in plain sight:

Two different things are happening, and people collapse them into one.

TDS is the bank cutting tax before it pays you and sending it to the government on your behalf. On a savings account, the bank does not do this.

Taxability is whether the income belongs in your return. Savings interest is taxable income, whatever the bank did or did not deduct.

So the interest arrives whole and untouched — and is still yours to declare. The bank's silence is not permission.

Contrast the fixed deposit and the recurring deposit, where "interest accrued or earned is subject to TDS beyond a stipulated amount." There the bank deducts, and many depositors then wrongly assume the matter is closed. In both cases the same principle applies: TDS is a collection mechanism, not a settlement of your tax liability.

One savings account per bank if it is a BSBDA

The Basic Savings Bank Deposit Account was built for a specific purpose — "introduced to promote FINANCIAL INCLUSION" — and everything about it follows from that:

Zero balance, with no requirement of an initial deposit
Available to individuals and minors through a guardian
Relaxed conditions on the number of deposits and withdrawals in a month
ATM card and passbook free of charge

All of which is generous. And then the condition that pays for it:

The logic is simple. The free, no-minimum account exists so that someone with very little money can be banked at all. It is not meant as a second, cheaper account alongside a regular one. So the bank offers a choice, not a combination: the BSBDA, or an ordinary savings account — not both, in the same bank.

Note the precise boundary. It bars another savings account in that bank. It does not bar a fixed deposit, a recurring deposit, or a savings account at a different bank.

Four rails, four jobs: NEFT, RTGS, IMPS and UPI

Think of four different ways to send a parcel across the city.

Rail	What makes it different	Needs
NEFT	No minimum or maximum amount. Can be started any time of day, takes a few hours to arrive	Account number + IFSC
RTGS	Real time, settled instantly — built for high value transactions. Only during specified hours on a working day	Account number + IFSC
IMPS	Instant transfer. On internet banking use IFSC; on mobile banking use the beneficiary's MMID — a 7 digit Mobile Money Identifier	IFSC or MMID
UPI	24 × 7, real time, from any smartphone using a VPA (Virtual Payment Address)	UPI-enabled bank app

The examinable distinctions, in one line each: NEFT has no limits; RTGS is the high-value real-time rail; IMPS is the one with MMID; UPI is the one with a VPA and runs round the clock.

And the everyday consequence: a ₹9,50,000 payment to a supplier on a working morning is RTGS. A ₹2,000 transfer at 11 p.m. on a Sunday is UPI — the only one of the four the chapter describes as 24 × 7.

A payment bank is a bank with three doors locked

A payment bank looks like a bank from the outside — savings accounts, current accounts, debit cards, remittances — and then you find three doors that do not open:

No fixed or recurring deposits. It "can accept demand deposit but NOT recurring/fixed deposit."
No credit cards. It "can issue ATM/Debit Cards but NOT credit cards."
No lending at all. It "CANNOT give loans/advances."

Learn those three as a set, because every exam question on payment banks is built from one of them.

Set it against a small finance bank, which is almost the opposite creature: it exists to lend, taking small deposits and disbursing small loans to "small business units, micro and small enterprises, small and marginal farmers and entities in the unorganized sectors", serving "unserved and underserved sections of population."

And the Business Correspondent is not a bank at all but a "representative of a bank who goes to customers, usually in remote locations/villages" — the branch walking to the village instead of the village walking to the branch, able to open accounts, take deposits, transfer funds and disburse small value credit.

The credit card you can hold without an account; the debit card you cannot

The four-row comparison table rewards slow reading, because one row runs against intuition.

	Credit card	Debit card
Whose money	The lending bank's credit facility	Your own savings/current account at the same bank
Interest	Levied if the outstanding is not paid on time	Not applicable
Credit history	Relevant to issuing it	Not relevant
Account with the issuer	No compulsion to hold one	A pre-requisite

The last row is the surprise. You can carry a credit card from a bank where you have never held an account — because the bank is lending you its money and only needs to be satisfied about your credit history. You cannot carry that bank's debit card without an account, because a debit card is simply a key to money that is already yours there.

One line from the ATM precautions deserves to sit alongside this: "Bank has NO LIABILITY in case the ATM card has been handed over for transaction to ANY OTHER PERSON except the account holder." Hand the card to a helpful stranger, a shop assistant or even a relative at the ATM, and the protection is gone.

Three days, and the clock starts with the SMS you ignore

The customer liability rules come down to three situations:

What happened	You bear
The bank was at fault — fraud, contributory negligence or deficiency on its part	Nothing
Nobody was at fault; the problem lay elsewhere in the system	Nothing — provided you notify the bank within THREE DAYS of receiving its alert
You were negligent	The entire loss, until the date you report it

Now look at the third row again, because it contains the most useful sentence in the chapter. Yes, if you shared an OTP or wrote the PIN on the card, the loss is yours. But only up to the day you report. Everything after that is the bank's problem.

Which means the worst possible response to "I think I made a mistake" is silence. Shame delays the call; delay converts a ₹48,000 loss into a ₹48,000 loss plus everything that happens next.

And notice where the clock starts: "within three days of RECEIVING AN ALERT FROM THE BANK." RBI has required banks to send SMS and e-mail alerts immediately after every transaction, and to make those messages capable of carrying the customer's reply. That ignored 9 p.m. SMS is not clutter. It is the start of your three days.

Key terms in this chapter

Basic Savings Bank Deposit Account (BSBDA): A zero-balance savings account introduced to promote financial inclusion, requiring no initial deposit, with relaxed limits on monthly deposits and withdrawals and a free ATM card and passbook. Its holder cannot open any other savings bank deposit account in that bank.
Business Correspondent: A representative of a bank who goes to customers, usually in remote locations or villages, to open accounts, accept deposits, transfer funds, collect loan deposits, disburse small value credit and collect payments or fees.
Commercial bank: A regulated financial institution dealing with public money and trust, regulated in India by the Reserve Bank of India, subject to mandatory inspection and audits at various intervals and audited by the RBI every year.
Credit card: A card giving the holder a credit facility for a period of time, funded by the lending bank. Interest is levied if the outstanding is not paid on time, credit history is relevant to its issue, and no account with the issuing bank is required.
Customer liability for unauthorised transactions: RBI's rule: nil liability where the fault is the bank's (fraud, contributory negligence or deficiency); nil liability where the fault lies elsewhere in the system, provided the customer notifies the bank within three days of receiving its alert; and where the customer was negligent, the entire loss until the date of reporting is borne by the customer.
Debit card: A card issued to a bank account holder for withdrawing money at ATMs from that account and for payment at point of sale. No interest applies, credit history is not relevant, and an account with the issuing bank is a pre-requisite.
Deposit insurance: A Central Government scheme under which all deposits are insured up to ₹5 lakh per customer in that particular bank, so that even if a bank fails, the Government returns up to ₹5 lakh of the depositor's savings in that bank.
Financial inclusion: Bringing people outside the formal banking system into it — the stated purpose of the BSBDA, and the reason small finance banks and business correspondents exist.
Fixed Deposit (FD): Funds placed with a bank for a fixed term at a certain interest rate. Interest is subject to TDS beyond a stipulated amount, senior citizens may get extra benefits, and both tenure and rate vary from bank to bank.
IFSC — Indian Financial System Code: A unique code assigned to each bank branch, used for NEFT, RTGS and IMPS transfers.
IMPS — Immediate Payment Service: An instant fund transfer service. Through internet banking it uses the beneficiary's account number and IFSC; through mobile banking it uses the beneficiary's MMID.
KYC — Know Your Customer: The process every customer must complete to open any type of bank account, enabling banks to know and understand their customers better and manage their risks prudently.
Lender of last resort: The role in which the RBI stands ready to lend to commercial banks that cannot obtain funds elsewhere, so that a liquidity problem at one bank does not become a failure of the system.
Loan against fixed deposit: Borrowing from the bank using an existing fixed deposit as security, available up to 75 to 90 per cent of the deposit amount, so that the deposit keeps running instead of being broken.
MMID — Mobile Money Identifier: A 7 digit number issued by a bank to a customer, used to receive funds through IMPS on mobile banking.
Monetary policy: The instrument through which the RBI creates financial stability, with the objectives of maintaining price stability and ensuring credit flows to productive economic sectors.
NEFT — National Electronic Fund Transfer: A transfer of funds from one bank account to another with no restriction on the minimum or maximum amount, using the beneficiary's account number and IFSC. It can be initiated at any time of day and takes a few hours to be credited.
Payment Bank: A category of bank that provides savings and current accounts, accepts demand deposits, issues ATM and debit cards and offers payment and remittance services — but cannot accept recurring or fixed deposits, cannot issue credit cards and cannot give loans or advances.
Recurring Deposit (RD): A deposit in which a fixed amount is placed at monthly intervals for a predetermined term. It earns higher interest than a savings bank account and attracts TDS beyond a stipulated amount.
Reserve Bank of India (RBI): The central bank of India, established on 1 April 1935 under the Reserve Bank of India Act. It formulates, implements and monitors monetary policy, regulates the currency and credit systems, conducts consolidated supervision of commercial banks, financial institutions and non-banking finance companies, acts as banker to the Government of India and is the lender of last resort for all commercial banks.
RTGS — Real Time Gross Settlement: A transfer to an account at another bank settled instantly on a real time basis, used for high value transactions, initiated during the specified period on a working day using account number and IFSC.
Savings Bank (SB) account: A low-interest but highly liquid account with ATM access. No TDS is deducted on savings interest, but the interest remains taxable in the hands of the depositor. It may be single or joint, and minors of any age may open one through a guardian.
Small Finance Bank: A category of bank taking small deposits and disbursing small loans, primarily to unserved and underserved sections — small business units, micro and small enterprises, small and marginal farmers and entities in the unorganised sectors.
Special Bank Term Deposit Scheme: A tax-saving term deposit giving relief under Section 80C of the Income Tax Act, 1961, with a five-year lock-in during which neither premature withdrawal nor a loan against it is allowed.
TDS — Tax Deducted at Source: Tax cut by the payer before paying you and remitted to the government. It applies to FD and RD interest beyond a stipulated amount but not to savings bank interest — which remains taxable nonetheless.
Transaction alerts: SMS and e-mail messages banks must send immediately after a transaction, enabled to carry the customer's reply so that fraud can be reported at once. The three-day reporting window runs from receipt of the alert.
UPI — Unified Payment Interface: Instant transfer of funds through any smartphone using a Virtual Payment Address, available 24 × 7 on a real time basis through a UPI-enabled bank app.
VPA — Virtual Payment Address: The identifier used to send and receive money over UPI, in place of an account number and IFSC.

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Original explanatory writing based on the official NISM workbook for Series SEBI-ICE, which is published and copyrighted by NISM. Check figures against the current edition at nism.ac.in.

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