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Deposit Sources of Funds:

A deposit account is a savings account, current account, or other type of bank account, at a
banking institution that allows money to be deposited and withdrawn by the account holder.
These transactions are recorded on the bank's books, and the resulting balance is recorded as a
liability for the bank and represents the amount owed by the bank to the customer.
Major Types of Deposits:

Current Accounts:
A deposit account held at a bank or other financial institution, for the purpose of securely and
quickly providing frequent access to funds on demand, through a variety of different channels.
Because money is available on demand these accounts are also referred to as demand accounts or
demand deposit accounts, except in the case of NOW Accounts. These deposits are also known
as demand deposits. These deposits can be withdrawn at any time.

Types of
Money Market Account:
Money Market Account is a deposit account that pays interest, and for which short notice (or no
notice) is required for withdrawals. In the United States, it is a style of instant access deposit
subject to federal savings account regulations, such as a monthly transaction limit.

Savings Accounts:
Savings deposits, or thrift deposits, are designed to attract funds from customers who wish to set
aside money in anticipation of future expenditures or financial emergencies. These deposits
generally pay significantly higher interest rates than transaction deposits do. While their interest
cost is higher, thrift deposits are generally less costly for a bank to process and to manage.

Fixed Deposits:
These deposits are also known as time deposits. These deposits cannot be withdrawn before the
expiry of the period for which they are deposited or without giving a prior notice for withdrawal.
If the depositor is in need of money, he has to borrow on the security of this account and pay a
slightly higher rate of interest to the bank. They are attracted by the payment of interest which is
usually higher for longer period. Fixed deposits are liked by depositors both for their safety and
as well as for their interest. In India, they are accepted between three months and ten years. The
first type is industrial paper generally issued by industrial companies to purchase inventories of
goods or raw materials. The second type if finance paper is issued mainly by finance companies
or financial holding companies to purchase loans of the books of other financial firms in the
same organization so that more loans can be made.

Time Deposit:
A money deposit at a banking institution that cannot be withdrawn for a preset fixed 'term' or
period of time. When the term is over it can be withdrawn or it can be rolled over for another
term. The longer the term the better the yield on the money on term deposit.

Call Deposit:
Call deposit is a deposit account which allows withdrawing the money without penalty, mostly
without notification to the bank. Often it bears favorable interest rate, but also a minimum
balance to take advantage of the benefits.

Transaction Deposits:
Transaction deposit is a banking deposit that has immediate and full liquidity, with no delays or
waiting periods. Transaction deposits can be transferred into other cash instruments, have
electronic payments authorized against them, or otherwise be transacted by the financial
institution solely at the request of the account holder. Transactions deposits must be held in
reserve by the bank at all times; they stand in contrast to time deposits and even deposits into a
savings account, which may have monthly limitations on the number of transactions or transfers
allowed. Making a deposit into a conventional checking account will be considered a transaction
deposit, as the account holder is allowed to withdraw the amount at any time.

Non Deposit Sources of Borrowed Funds

Figure: Different types of Non Deposit Sources of Borrowed Funds

Certificates of Deposit:
Negotiable CDs were developed to attract large corporate deposits and savings from wealthy
individuals. Because these were not insured they paid a higher interest rate than traditional
deposits. The concept of liability management and short-term borrowing to supplement deposit
growth was given a significant boost early in the 1960s with the development of negotiable
CD.Negotiable CDs offer a way to attract large amounts of funds quickly and for a known time
period. However, these funds are highly interest sensitive and often are withdrawn as soon as the
maturity date arrives unless management aggressively bids in terms of yield to keep the CD. A
certificate of deposit (CD) is a money market instrument issued by a depository institution as
evidence of a time deposit. Small denomination certificates of deposit are issued to retail

Certificates of deposit fall into three general categories:
Domestic CDs are issued within a country by a domestic bank or other depository
Foreign CDs are issued within a country by a domestic branch of a foreign depository
Euro CDs are issued outside a country but are denominated in that countrys currency.

Bankers Acceptance:
A banker's acceptance, or BA, is a promised future payment, or time draft, which is accepted and
guaranteed by a bank and drawn on a deposit at the bank. The banker's acceptance specifies the
amount of money, the date, and the person to which the payment is due. After acceptance, the
draft becomes an unconditional liability of the bank. But the holder of the draft can sell
(exchange) it for cash at a discount to a buyer who is willing to wait until the maturity date for
the funds in the deposit.So a bankers acceptance (BA) is a money market instrument: a short-
term discount instrument that usually arises in the course of international trade.
A bankers acceptance is an obligation of the accepting bank. Depending on the banks
reputation, a payee may be able to sell the bankers acceptancethat is, sell the time draft
accepted by the bank. It will sell for the discounted value of the future payment. In this manner,
the bankers acceptance becomes a discount instrument traded in the money market. Paying
discounted value for a time draft is called discounting the draft.

Eurodollar Borrowings from Own Foreign Offices:
Eurodollars arise from dollar deposits made in financial institutions and at branch offices outside
home country. Many Eurodollar deposits arise from nations balance-of-payments deficits that
give foreigners claims on home nations assets and from the need to pay in dollars for some
international commodities (such as oil) that are denominated principally in U.S. dollars. Access
to these funds is obtained by contacting correspondent banks by telephone, wire, or cable.

Security RPs:
A repurchase agreement, also known as a repo, RP, or sale and repurchase agreement, is the sale
of securities together with an agreement for the seller to buy back the securities at a later date.
The repurchase price should be greater than the original sale price, the difference effectively
representing interest, sometimes called the repo rate. The party that originally buys the securities
effectively acts as a lender. The original seller is effectively acting as a borrower, using their
security as collateral for a secured cash loan at a fixed rate of interest.

Federal Fund Borrowings:
Federal funds are overnight borrowings by banks to maintain their bank reserves at the Federal
Reserve. Banks keep reserves at Federal Reserve Banks to meet their reserve requirements and to
clear financial transactions. Transactions in the federal funds market enable depository
institutions with reserve balances in excess of reserve requirements to lend reserves to
institutions with reserve deficiencies. These loans are usually made for one day only, that is,
"overnight". The interest rate at which these deals are done is called the federal funds rate.
Federal funds are not collateralized; like Eurodollars, they are an unsecuredinterbank loan.

Commercial Paper Issued:
Commercial paper consists of short-term notes, with maturities ranging from three or four daysto
nine months, issued by well-known companies to raise working capital. The notes aregenerally
sold at a discount from their face value through security dealers or through directcontact between
the issuing company and interested investors.Commercial paper is a high-quality, short-term debt
obligation with an excellent credit rating to provide for short-term cash needs. There are two
types of commercial paper.