BANKING PROJECT (SECTION-2)

JHANVI KANKALIYA
AU1712050
Topic-2

Types of deposits with features

Banks accept deposits from the customers and give out loans to the borrowers. The demand
deposits can only be accepted by banks. This unique feature of bank helps bank to create
credit.Customers deposit their money in the banks in Lieu of interest. Bank than lend this money
to borrowers.

The purpose of depositing money could be different for different people. Not every person can
regularly. Money is deposited in the bank only when they have a surplus of income. The main
purpose for these people is to keep the money safe and earn little interest on their savings. The
main motive of depositing money for some people could be to earn interest on the surplus
money.Businessmen use these accounts to pay out their expenses from the account whereas
get their income deposited in the same account.

So there are many kinds of deposits with various features which fulfill the needs of different
customers as per their purpose to a certain extent. Customers may choose type of deposit
according to their requirements and the motive behind it and choose the one which best suits
them.

Types of Deposits

On the basis of the purpose served , bank deposit accounts can be categorised as follows:

Savings Account
Current Deposit Account
Fixed Deposit Account
Recurring Deposit Account

Savings Bank Account

As the name suggests this type of account for the people whose main purpose is to save
money, so generally people having a definite income like salaried people save a proportion of
their income and deposit it in accounts. The bank requires a minimum deposit initially to open
the account. The minimum initial investment vary from bank to bank. Main feature of such
account is that the deposits can be made at any time and their and no time constraints in this
type of account.

The process of withdrawing the money can be carried out by using certain ways. It could be
done by issue of cheque, ATM card or by sign on withdrawal form. Banks generally put
restrictions on the number of times money could be withdrawn from the savings bank account.
The amount of interest depends on the amount which is there in your bank account i.e, deposits
less withdrawals. The rate of interest offered on the deposits of a savings bank account differ
from bank to bank. Also it is required by the account holder to maintain a certain minimum
amount of balance in their accounts as predetermined by the bank.

The rate of interest offered is quite modest, but they are considered safe and reliable. It could
be used to deposit the cash you want to fulfill your short term needs it is the best way of parking
your money.

Current Deposit Account

When the main purpose of opening an account is to make payments to different parties, than
current account would be an appropriate choice. Companies, institutions, large and medium
sized businesses, all are required to pay numerous times to many parties. Savings account
cannot fulfill this requirement for them as the number of withdrawals are restricted and
limitations is imposed on the withdrawals. To serve this purpose bank offers another type of
account to its customers where they could make withdrawals with no restrictions.

Current account also requires a minimum amount of deposit to be maintained by the customer.
No amount of interest is paid on the balance amount of such deposits.

Current account also provides the customers with overdraft facilities. Overdraft facilities allow
the account holder to withdraw more than the remaining balance of the account. It helps
businesses and other entities to get flexible loans of desired amount as and when required. It
makes the management of working capital easier for them. The rate of interest of such services
is very high to the customers due to its nature of uncertainty for the bank and flexibility given to
the customer. Bank does not offer this service to everyone. It depends upon the
creditworthiness of the customer. Also the maximum amount of overdraft is ascertained and
bank would not provide any amount of withdrawal above this limit. Bank has the right to ask for
the return of money by the customer without any notice.

Fixed Deposit Account

The customers whose sole purpose is to save money for a certain amount of time can deposit
their money in such accounts. As the bank does not have the money for a longer period of time
and no withdrawals are allowed by the customers, the amount of interest paid is higher. The
high amount of interest attracts customers to deposit money for a longer period of time as
compared to savings account where the interest rate offered is lower comparatively.

The period of deposition is specified at the start of the deposit. The period of deposit generally
range from 15 days to three years or more, in this time duration no withdrawal are allowed. In
case of an emergency the deposited can withdraw the amount before the maturity of the term
period.Generally a penalty is charged by the bank on the depositor, the amount would be lower
than that was predetermined. Although the bank gives the facility of withdrawing the interests on
this fixed deposits on certain intervals without any charges of penalty. At the time of maturity,
the deposit could be either withdrawn or renewed for a new tenure with changes in the terms
and conditions of the contract. It is possible you turn up getting more interest than you were
getting before or vice-versa. Banks also consider these deposits as security to give out loans to
the customer itself.

Fixed deposits do not contribute to credit creation as they are not demand deposits. Credit is
created only when the money is available to both the borrower and lender at same point of time
by the bank. But this is not the case with the fixed deposits and thus they do not contribute to
credit creation.

Recurring Deposit Account

People having regular income save some proportion of it for future needs. They do not have a
surplus of lump sum to deposit it in a fixed deposit. Also they can commit to save a certain
amount on every interval which is generally a month long. It is a little different than savings
account because there you don't have to deposit a certain sum of money.
So to open an account, the holder has to agree to deposit a fixed amount per month for a
certain time period.The amount of money received on maturity consists of the total deposits as
well as the interest earned on it. However unlike fixed deposits, the account holder gets the
flexibility of receiving the total deposits along with the interest earned on it without severe
penalty.

The interest offered on these deposits are higher than that of a savings account because of
commitment involved and also they don't provide the facility of withdrawals.

However it is lower than that of a fixed deposit because there is no lump sum involved and it
has more flexibility.

Banks visited

Bank of India- Shahibaug Branch (Public Sector Bank)

ICICI Bank- Shahibaug Branch (Private Sector Bank)
Canara Bank- Ashram Road ( Foreign Bank)

References

https://www.google.com/url?sa=t&source=web&rct=j&url=https://www.toppr.com/guides/general
-awareness/banks/types-of-deposit-and-accounts/&ved=2ahUKEwivhYC5r9jlAhVs63MBHWVG
C1cQFjARegQIChAB&usg=AOvVaw2NPMT1YexiikfKunu748sl
https://www.google.com/url?sa=t&source=web&rct=j&url=https://cleartax.in/s/deposit&ved=2ah
UKEwivhYC5r9jlAhVs63MBHWVGC1cQFjASegQICRAB&usg=AOvVaw3CjUMoW1FDXqLy2gw
7FTG6