Deposit Management of a Bank

Deposit
Deposit is the main component of bank’s fund, that means
money held at a bank. A deposit is a transaction involving a
transfer of money to another party for safekeeping.
 Objective of Bank Deposit

Ensure productive investment

Collection of bank fund of the scattered savings of the
clients

Fulfilling the excess need for

Extending the scope of loan
money
 Types of Bank Deposits

Saving Deposits:
 Suitable for people with definite income and tendency to save money.
 Money can be deposited at any time in this account but withdrawal is subject
to some restriction.
 Withdrawals can be made either by signing a withdrawal form or by issuing
a cheque or by using an ATM card.
 The rate of interest on savings bank account varies from bank to bank and
also changes from time to time.
 A minimum balance has to be maintained in the account as prescribed by the
bank.
 Types of Bank Deposits
Current deposits:
 Money can be withdrawn at any time in this account.
 No interest.
 The account holder pays a certain amount each year as an operational
charge to bank.
 These accounts have overdraft facility.
Term/ Fixed Deposits:
Agreed rate of interest
Pre-set fixed period of time ranging from 1 month to 5 years.
Comparatively safe investment option.
Interest payment option
Availability of loan
Available at financial institutions like Banks, Non-Banking Financial
Companies (NBFC), credit unions, post offices and building societies.
 Types of Bank Deposits
Besides these three types of deposits, bank may also offer various
types of deposit account. As for example:
Home savings account
School saving account (City Bank)
Education saving plan (HSBC Bank)
Foreign Currency Deposit (DBBL Bank)
Happy Savers Account (BRAC Bank)
 Deposit Processing
New Account Section

Application form,
photograph & documents

Checking

Permission of Manager
Depositing initial
amount
Data Entry
Checque Book and
Deposit slip

Book Keeping

Depositor’s Statement
Review & encouraging
other depositors
 Deposit Mix

Deposit mixing means the making of a suitable combination of deposit option so

that diversification of risk exposure and increasing the profitability from different
deposit mix is possible for a bank.
Ownership mix of deposit: Considers different types of owners of deposit account.
Different ownership of deposit accounts represents different pattern of putting
money and withdrawals and also different tenure.
Types of deposit mix: Considers different types of deposit account.
Size mix of deposit: Considers deposit size depending on the amount to be placed
on deposit account.
 Factors Determining the level of Deposit

There are some internal and external factors which influences the determination of
deposit level.
Internal factors External factors
Quality of Bank Personnel: National Income:
Employees with efficient Deposit level increases in progressive
professionalism and social skill may economic condition while in economic
attract more deposit and they also can down turn deposit usually deteriorates.
use their knowledge experience to
satisfy existing depositors.

Diversified Services: Local Economy:

Diversified services and offers enable a A bank’s deposit level is also affected
bank to survive in a highly competitive by the condition of local economy
banking market. Different types of where a bank operates.
deposit schemes with relatively newer
and depositors friendly facilities may
attract more depositors.
 Factors Determining the level of Deposit
Internal factors
Public Confidence:
Depositors are much more concern with
the safety of their money deposited in a
bank. The bank that wins the confidence of
public being a progressive bank and
efficient in operation may attract more
deposit.
Interest rate:
Banks usually offers different deposit
accounts with different rates of interest.
The volume interest rate also determine the
level of interest.
External factors
Government’s Role:
Financial initiatives taken by the
government also influences the level of
bank deposit. Specially fiscal policies, govt.
steps for developing economy, poverty
alleviation, entrepreneurship
development etc.
Population:
Large volume of population and their
financial activities impacts the activities of
bank. Population size also may determine
the level of deposit.
 Deposit Insurance

Deposit insurance was introduced to provide a safeguarded for

depositor for avoiding the risk of banking business.

Deposit insurance is a measure implemented in

many countries including Bangladesh to protect bank depositors
fully or partly when banks suffer from inability to pay its debts
when due or business failure and bankruptcy. Deposit insurance
system promotes financial stability of a bank.
 Deposit Insurance in Bangladesh

Deposit Insurance Systems is an institutional initiative of Bangladesh

Government for the protection of the depositor's interest. The system
works among deposit owners who deposited in scheduled banks.
In Bangladesh, deposit insurance was introduced in August, 1984 as a
scheme in terms of the provisions of the legal framework called "The Bank
Deposit Insurance Ordinance, 1984" promulgated by the Government on
August 11, 1984. In July, 2000 the Ordinance was repealed by an Act of
the Parliament called the "Bank Deposit Insurance Act, 2000". Deposit
Insurance in Bangladesh is now being administered by the said Act.
Bangladesh Bank has taken the membership of International Association of
Deposit Insurers (IADI) in 2006.
 Deposit Insurance in Bangladesh

Objectives of DIS:
Banks are faced with increased risk, since working with borrowed money
and having liabilities to a number of depositors, and a bankruptcy of a
single bank could initiate a cycle of instability hitting entire financial
system. The Significant objectives of Deposit Insurance Systems in
Bangladesh, like in all other countries, are a contribution to the overall
financial stability. Moreover, the followings are the special objectives of
Deposit Insurance Systems in Bangladesh:
 Protect small depositors,
 Enhance public confidence,
 Enhance stability of the financial system,
 Increase savings and encourage economic growth,
 Enhancing more propitious bank services.
 Deposit Insurance in Bangladesh

Deposit Insurance Trust Fund:

1. Bangladesh bank maintains a fund in the name of Deposit Insurance
Trust Fund and the amount of the fund can be invested be BB in any
approved sector.
2. The following amounts will be deposited in the fund namely,
• Money received from insured bank;
• Return on investment of the amount from insured bank;
• Money received from the bank liquidated under section 7 hereof;
• Income received from other source.
1. Amount of the fund will not be spent for any purposes other than for
repayment of dues of the depositors of the bank liquidated under
section 7 hereof and for the cost of maintenance of the fund.
2. Nothing of Income Tax Ordinance 1984 will be applied to the income
of the fund.
 Deposit Insurance in Bangladesh

Insured Bank:
All scheduled banks including foreign banks operating in Bangladesh are
brought under the Deposit Insurance Scheme by the Bank Deposit
Insurance Act, 2000. Membership is compulsory for all Banks existing on
the date of the enforcement of this act as provided in the said Act.
Premium of the Insured Bank:
1. Each insured bank will pay the premium to the fund @ 0.07% per
annum on such portion of its deposits as may be determined by the BB
from time to time. But BB can change the rate with the approval of the
government.
2. Insured bank will pay the premium from its expenditure account.
3. Premium will have to be paid at such time and mode as specified from
the BB.
4. If any insured bank fail to pay the premium, BB has the power to
direct to debit the fund with equal amount from the account of the said
bank maintained in BB.
 Deposit Insurance in Bangladesh

Action against the failed bank:

If any insured bank fail to pay the premium once more, BB has the power
to allow the chance of hearing and by notification in the Official Gazette,
has the power to refrain any insured bank from accepting deposit for the
time as specified in the notification.
Liability of the fund:
1. If the liquidation order is passed for the insured bank, BB will pay the
depositors amount equal to one’s deposit but not exceeding the amount
of tk. 1 lac.
2. If any depositor has more than one account in the liquidated bank and
the balance is more than 1 lac, will not be paid more than 1 lac. And the
remaining amount will be adjusted as the amount payable to the
depositors by the official liquidator.
3. The official liquidator will submit the list of deposits of the depositors
within 90 days to BB in the form as specified by BB.
4. The trustee board will arrange the payment from the fund to the
depositors within 90 days as per the list.
 Deposit Insurance in Bangladesh

5. The trustee board will arrange the payment from the fund to the
depositors within 90 days as per the list.
6. If the fund falls in short, the government will, through BB lend the fund
the shortage amount at bank interest rate.