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BANK DEPOSIT

DEFINITON Money placed into a banking institution for safekeeping. Bank deposits are made to deposit accounts at a banking institution, such as savings accounts, checking accounts and money market accounts. The account holder has the right to withdraw any deposited funds, as set forth in the terms and conditions of the account. The "deposit" itself is a liability owed by the bank to the depositor (the person or entity that made the deposit), and refers to this liability rather than to the actual funds that are deposited. A bank deposit account is a current account, savings account, or other type of bank account, at a banking institution that allows money to be deposited and withdrawn by the account holder.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 represent the amount owed by the bank to the customer. Some banks charge a fee for this service, while others may pay the customer interest on the funds deposited.

MAJOR TYPES Checking 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.

Savings accounts: Accounts maintained by retail banks that pay interest but can not be used directly as money (for example, by writing a cheque). Although not as convenient to use as checking accounts, these accounts let customers keep liquid assets while still earning a monetary return. Money market account: A deposit account with a relatively high rate of interest, and short notice (or no notice) 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. Time deposit: A money deposit at a banking institution that cannot be withdrawn for a preset fixed 'term' or period of time. When the term is over it can be withdrawn or it can be rolled over for another term. Generally speaking, the longer the term the better the yield on the money.

Checking account This account is 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. Transactional accounts are meant neither for the purpose of earning interest nor for the purpose of savings, but for convenience of the business or personal client; hence they tend not to bear interest. Instead, a customer can deposit or withdraw any amount of money any number of times, subject to availability of funds.

NAME A transactional account is known as a checking account (or chequing account) in North America,[1] and as a current account or cheque account in the United Kingdom, Hong Kong and some other countries. Because money is available on demand it is also sometimes known as a demand account or demand deposit account (DDA). HISTORY In Holland in the early 1500s, Amsterdam was a major trading and shipping city. People who had acquired large accumulations of cash began to deposit their money with "cashiers" in order to protect their wealth. These cashiers held the money for a fee. Competition drove cashiers to offer additional services, including paying out money to any person bearing a written order from a depositor to do so. They kept the note as proof of payment. This idea spread to other countries including England and the English colonies in North America, where land owners in Boston in 1681 mortgaged their land to cashiers who provided an account against which they could write checks. In the eighteenth century in England, preprinted checks, serial numbers, and the very word "cheque" appeared. By the late eighteenth century, the difficulty of clearing checks (sending them from one bank to another for collection) gave rise to the development of clearing houses. Savings account Savings accounts are accounts maintained by retail financial institutions that pay interest but cannot be used directly as money (for example, by writing acheck). These accounts let customers set aside a portion of their liquid

assets while earning a monetary return. For the bank, money in a savings account may not be callable immediately and therefore often does not incur a reserve requirement freeing up cash from the bank's vault to be lent out with interest. The other major types of deposit account are transactional (checking) account, money market account, and time deposit. Definition of 'Savings Account' A deposit account held at a bank or other financial institution that provides principal security and a modest interest rate. Depending on the specific type of savings account, the account holder may not be able to write checks from the account (without incurring extra fees or expenses) and the account is likely to have a limited number of free transfers/transactions. Savings account funds are considered one of the most liquid investments outside of demand accounts and cash. In contrast to savings accounts, checking accounts allow you to write checks and use electronic debit to access your funds inside the account. Savings accounts are generally for money that you don't intend to use for daily expenses. To open a savings account, simply go down to your local bank with proper identification and ask to open an account.

Demat account The term "demat", in India, refers to a dematerialised account for individual Indian citizens to trade in listed stocks or debentures in electronic form rather than paper, as required for investors by the Securities and Exchange Board of India (SEBI). In a demat account, shares and securities are held

electronically instead of the investor taking physical possession of certificates. A demat account is opened by the investor while registering with an investment broker (or sub-broker). The demat account number is quoted for all transactions to enable electronic settlements of trades to take place. Access to the demat account requires an internet password and a transaction password. Transfers or purchases of securities can then be initiated. Purchases and sales of securities on the demat account are automatically made once transactions are confirmed and completed. Advantages of demat A demat account reduces brokerage charges (which are usually around 0.5%), makes pledging/hypothecation of shares easier, enables quick ownership of securities on settlement resulting in increased liquidity, avoids confusion in the ownership title of securities, and provides easy receipts for public issue allotments or IPOs. A demat account also helps avoid problems typically associated with physical share certificates, for example: delivery failures caused by signature mismatch, postal delays and loss of certificate during transit. Further, it eliminates the risks associated with forgery and loss due to damaged stock certificates. Demat account holders also avoid stamp duty (as against 0.5 per cent payable on physical shares) and filling up of transfer deeds. Demat account holders usually obtain quicker receipts of benefits like stock splits and bonuses. The other advantage is the ability access stocks, bonds, ETFs, IPO, Gold ETF, etc. all in one place. Its like one centralized investment account from where you can access and maintain investment products.

Recurring deposit Recurring Deposits are a special kind of Term Deposits offered by banks in India which help people with regular incomes to deposit a fixed amount every month into their Recurring Deposit account and earn interest at the rate applicable to Fixed Deposits. It is similar to making FDs of a certain amount in monthly installments, for example Rs 1000 every month. This deposit matures on a specific date in the future along with all the deposits made every month. Thus, Recurring Deposit schemes allow customers with an opportunity to build up their savings through regular monthly deposits of fixed sum over a fixed period of time. The Recurring Deposit can be funded by Standing instructions--instructions by the customer to the bank to withdraw a certain sum of money from his Savings/ Current account and credit to the Recurring Deposit every month. When the RD account is opened, the maturity value is indicated to the customer assuming that the monthly instalments will be paid regularly on due dates. If any instalment is delayed, the interest payable in the account will be reduced and will not be sufficient to reach the maturity value. Therefore, the difference in interest will be deducted from the maturity value as a penalty. The rate of penalty will be fixed upfront. Tax Deducted At Source ( TDS ) is not applicable on RDs. The customer can avail loans against the collateral of Recurring deposit up to 80 to 90 % of the deposit value.
Rate of Interest offered is similar to that in Fixed Deposits.

Why should people invest in bank deposits? Traditionally, bank deposits have been the favourite investment avenue for us Indians. Close to 20 per cent of household savings are invested in bank deposits. And not without reason. Reasons for deposit in bank Low risk Banks deposits come with very low default risk and offer security of your capital. The real risk to these products is in the form of inflation. This is because if interest rates are low, the post inflation returns on FDs may be negligible or even negative Capital guarantee Your deposit of up to Rs 1 lakh in any bank is protected under RBI's Deposit Guarantee Scheme. This means if you place your deposit in a bank that defaults, you will get up to Rs 1 lakh of your money in the deposit. Fixed returns Interest rate on bank deposits is fixed for the entire tenure of the deposit. FDs of different tenures carry different interest rates. Generally, higher the tenure, higher is the rate.

Liquidity You can invest in a FD for as little as a month too. Thus, it provides ample liquidity as you can place your surplus for the short term. Besides, bank deposits can be prematurely withdrawn. However, you will need to pay a penalty of 1 per cent of the interest rate. Good returns With high interest rates at present, FD returns have become attractive. For a longer tenure deposit (two to three years), you can even get a rate of around eight to nine per cent per annum. However, rates vary from bank to bank.