BANKING PRODUCTS

TBH_UiTM
Johor
Outlines:
I. DEPOSIT PRODUCTS

II. REMITTANCE

TBH_UiTM
Johor
I. DEPOSIT PRODUCTS

1. Saving account
2. Fixed deposit account
3. Negotiable Instrument of Deposits (NIDs)
4. Current account

TBH_UiTM
Johor
 1. SAVINGS ACCOUNT DEPOSITS
 Savings account (SA) is the interest-bearing savings deposit provided by
banks. Interests are calculated daily and the payments are credited to SA
semi-annually or sometimes monthly.
 SA can open for individual, joint, trustees (minors), societies, associations
& institutions.
 Savers are given passbook or statement.
 Savers need to maintain some minimum amount of the account, e.g.
RM20.
 SA provides Automated Teller Machines (ATMs) that helps savers to
manage account: deposit, withdrawal, fund transfer, payment etc. Bank
charge annual fees of RM 8 on the ATM.
TBH_UiTM
 Most of the bank do not provide cheque with this account. Johor
 Interest on Savings Accounts
 Deposit is a component of liability in bank’s statement of financial
position as bank needs to pay interest on savings. Bank uses deposit
to provide funds to the borrowers by earning interest on loan.

 Simple interest calculation (365 days a year)

 Interest payment = P x R x T

 where: P = principle (daily balance)

 R = quoted rate
 T = time
TBH_UiTM
5 Johor
Tutorial Discussion
■ What other types of services can be performed by using an
ATM?

■ What are the advantages and disadvantages of ATM to:

– Banks
– Deposit account holder?

TBH_UiTM
Johor
 TBH_UiTM

2. FIXED DEPOSITS (FD) Johor

■ A type of time deposit or term deposit account where

depositors cannot withdraw the deposits until a specified
maturity date.
■ Depositors place a sum of money with a bank for a fixed
period, e.g 1, 2, 3…or 60 months and earn a fixed interest
rate.
■ Depositors are given certificate of deposits.
■ There is no secondary market for FD.
■ FD can be made for any amount except the minimum of
RM5,000 must be kept for placement of FD for one month. 7
 Interest on FD Accounts
TBH_UiTM
Johor

■ Simple interest calculation (365 days a year)

Interest payment = P x R x T
where: P = Deposit amount
R = quoted rate
T = No of days the FD is held

 1,2,3…12 months : Interest payable at maturity.

 More than 12 months : Interest to be paid every 6 months.

■ Any premature withdrawal/ upliftment before maturity date may

caused depositors to forgo a portion of their interest as a penalty.
8
Premature Withdrawal
 FD < RM100,000
 FD 1-3 months: Zero interest to be paid.
 FD > 3 months:
■ No interest to be paid for withdrawal before 3 months.
■ Interest is paid half for withdrawal of after 3 months but before
maturity.
 FD > RM100,000
 No interest to be paid if withdraw before the maturity.
 Bank may offer option to borrow against FD (use FD as
collateral) for this type of premature withdrawal. TBH_UiTM
9 Johor
 3. Negotiable Instrument of Deposits (NIDs)
 Instrument issued by the bank certifying that a certain sum in
deposits has been made for a certain tenure at a specified rate
of interest.

 NIDs are deposits for fixed period that are negotiable and
guaranteed by the bank, it can be sold in the highly liquid
secondary market before its maturity date if the need for funds
arises.

 However, they cannot be cashed and must hold until maturity

for the new buyer who purchase these NIDs in secondary
market.
3. Negotiable Instrument of Deposits (NIDs)
 Can be issued with a minimum maturity of 1 month from the
date of issue. The tenure may also be for odd number of days
e.g. 118 days.

 The nominal amount for NID must be more than RM60,000. In

US, the denominations range from $500,000 to $10 million.

 NIDs often bought by large corporation/ institutional investors

who usually invest in large denomination as a source to invest
in a low risk and short-tenure security.
4. CURRENT ACCOUNT
 A demand deposit account which a customer can deposit
money and effect payments by the drawing of cheque.
 A cheque is payable on demand.
 Usually open by business entity to perform business
transactions, e.g.  make payment to creditor by issuing
cheque.
 Bank collects money on behalf of its customers and credits
the money to customers' current accounts.
 Type: individuals, joint, sole proprietors, partnerships,
companies, trustees accounts. 12 TBH_UiTM
Johor
CURRENT ACCOUNT: OVERDRAFT
Current account holder can have an overdraft facility that must
pre-arranged and agreed by the bank.

 The current account holder can overdraw the balance in his

account on a temporary basis to cover the shortfall in funds. Thus,
overdraft is a way of borrowing money from the bank via current
account, allowing account holder to spend more than what he has
in his account balance.

 Banks usually charge interest on overdraft for lending money,

where this interest is usually charged at a higher rate than a
personal loan. TBH_UiTM
Johor
CURRENT ACCOUNT
 Opening of the account: Individual account – IC/passport;
Company account – Memorandum and Articles of
Association for a company and extract of resolution.
 An introducer (to ensure account is opened not for
illegal/fraudulent activities) and a minimum initial deposit
are usually required to open a new current account.
 Can be opened in most of the commercial banks. With effect
from 2 January 2015, cheque processing fee of RM0.50 is
charged when a cheque is received by a bank for processing,
for encashment over the counter or for depositing into an
account. 14 TBH_UiTM
Johor
CHEQUES
 A written order from a current account holder (drawer),
instructing bank to pay a specified sum of money to a
named recipient (bearer).
 Cheques are not legal tender but are legal documents.
 A cheque can be ante-dated or post-dated.
 A cheque can be issued to a business or an individual for
any amount, however, an account must have enough
fund to allow the payment to go through.

15 TBH_UiTM
Johor
 Outlines:
II) REMITTANCE  Cashier’s Order
 Demand Draft
 Telegraphic Transfers
 Online Transfers

TBH_UiTM
16
Johor
WHAT IS REMITTANCE?
 Funds transfer where a sum of money is sent to
someone for payment.

 Provided by a commercial banks to its customers.

TBH_UiTM
17 Johor
1. Cashier’s Order (CO)
 A banker’s cheque issued on behalf of bank’s customer.
 An order to bank to make payment on behalf of the
customer to an identified payee in Malaysia.
 CO bears the authorized signature of the bank’s officer.
 Has advantage over a personal cheque as it offers an
convenient way to transfer money to recipient who does
not accept cash or personal cheques, and guarantee that
cheque will not bounce.
TBH_UiTM
18 Johor
1. Cashier’s Order/ Banker’s Cheques
 Required Documents: NRIC or Passport, account
no. (Savings or Current accounts) and payee's
details. 
 Cost: Cheque processing fee (e.g. RM0.50 per
cheque), stamp duty (RM0.15) and commission/
service charge (RM5).
 Only issued in Malaysian Ringgit, but CO can be
deposited in any account maintained Malaysia.
TBH_UiTM
19 Johor
 2. Demand Drafts (DD)
 A written order issued by banks on customer’s behalf to remit funds
to the beneficiary who may residing in another town or another
country.
 DD can be deposited into the beneficiary's bank account or
encashed over the bank’s counters.
 Applicants: All Malaysian citizens, permanent residents and
foreigners aged 18 years and above with valid identification
credentials.
 For remittance amount of more than MYR10,000 equivalent,
supporting document is required.
 Two types: Local and Foreign demand drafts. TBH_UiTM
20 Johor
2. Demand Drafts (DD)
a) Local DD:
 Drawn in Ringgit Malaysia and payable in Malaysia.
 Local Outward DD: Drawn to other bank’s branch.
 E.g.: CIMB Segamat drawn a DD to CIMB JB.

 Local Inward DD: Issued by other branch on oneself.

 E.g.: CIMB Segamat received a DD drawn by CIMB Pulau
Pinang.
TBH_UiTM
21 Johor
2. Demand Drafts (DD)
b) Foreign DD
 DD denominated in foreign currencies.  
 Foreign Outward DD: Drawn to bank’s oversea correspondent
banks.
 Additional details needed: amount, currency and bank’s selling
rate.

 Foreign Inward DD: Issued by bank’s oversea correspondent

banks.
 Need to convert the foreign currency into MYR. TBH_UiTM
22Johor
3. Telegraphic Transfer (TT)
 The remittance of funds via SWIFT (Society for Worldwide
Interbank Financial Telecommunications) system, telegraph,
telex, fax or telephone transmission.
 Beneficiary may be residing in local or overseas.
 Upon receiving TT, beneficiary may opts to collect personally,
credit into account, issue banker’s cheque or making
interbank payment.
 Costs: Service charge or commission, cost of wire.

TBH_UiTM
Johor
3. Telegraphic Transfer (TT)
a) Outward TT
– TT to other local (local TT) or overseas (foreign TT)
banks/ bank’s branch in MYR or foreign currencies.
b) Inward TT
– TT receives from other local or overseas banks/ bank’s
branch.
– Foreign TT needs to convert into MYR before effecting
payment.
TBH_UiTM
Johor
4. Online Transfer
 Funds transfer from one account to another via the
online system:
 Internet,
 ATM,
 Mobile banking or
 Over-the-counter.

 Transfer funds within accounts maintained in same

banks or to other banks via Interbank GIRO &
TBH_UiTM
Instant Transfer (IBFT). Johor
4. Online Transfer
 Funds transfer from one account to another via the
online system:
 Interbank GIRO (IBG)  fund transfer

 RENTAS

 SWIFT.
TBH_UiTM
Johor
 4. Online Transfer: Interbank Giro (IBG)
 IBG is an electronic fund transfer payment system which allows
transfer of money between participating banks within Malaysia.
 It is a convenient, secure and cost effective way that allows
customers to move fund between different banks (MEPS). 
 It helps customers to transfer funds between own or third party
accounts for the purpose of normal fund transfer or payments
of loan or credit card accounts and to other payees.
 The IBG system is managed by MyClear, a subsidisary of Bank
Negara Malaysia.
TBH_UiTM
Johor
4. Online Transfer: Interbank Giro (IBG)
 IBG transaction can be performed via
Fees and
 ATM (RM1.00) charges
are vary
 Internet Banking (IBG Giro RM0.10, Instant transfer RM2) between
banks.
 Over the Counter (RM2)
 Depending on banks, the maximum limit for fund transfer via internet
banking is up to RM10,000 per day, while over the counter IBG transfer
can be as large as RM1,000,000.
 Duration of crediting to the other account is subject to the beneficiary
bank, e.g. on a business days, funds transfer by 12.30pm (internet
banking & OTC) or 5pm (ATM) are available in the beneficiary’s account
before 12 midnight on the same business day.
 Successful IBG transactions cannot be reversed. TBH_UiTM
Johor
 4. Online Transfer: RENTAS SYSTEM
 A type of payment system: Real Time Electronic Transfer of
Funds and Securities.
 Replaced the SPEEDS System for interbank payment and
scripless securities since 24 July 1999.
 Objective: To improve the overall efficiency of the large
value payment system, particularly in respect of reducing
interbank settlement risk.
 Enable payment instructions between the participants of the
system to be processed and settled individually and
continuously throughout the working day.
TBH_UiTM
Johor
4. Online Transfer: RENTAS SYSTEM
 There are two types of transactions (transfer and settlement)
handled by RENTAS:
i. Interbank Funds Transfer System (IFTS);
ii. Scripless Securities Transfer System (SSTS). 

 Participants: Commercial banks, Islamic banks, Investment

banks, Development Financial Institutions and institutions that
are active players in the money market or capital market.
 The receiver will be able to use the funds immediately without
being exposed to the risk of the funds not being settled.
 4. Online Transfer: RENTAS SYSTEM

 Transactions performed by RENTAS members via the system:

 Interbank funds transfer;
 Cash withdrawals from Bank Negara Malaysia;
 Statutory reserve adjustment;
 Money market settlement;
 Ringgit leg of foreign exchange; 
 Scripless securities transfer.
4. Online Transfer: SWIFT
 Society for Worldwide Interbank Financial Telecommunication.
 A network that used by banks worldwide to send and receive
information accurately, safely and quickly about transactions on
international money and security transfers .
 More than 10,000 financial institutions and corporations in 212
countries uses SWIFT every day to exchange millions of
standardised financial messages.
 The information and messages are transferred via a standardized
system of codes, commonly called SWIFT codes.
 It involves the secure exchange of proprietary data while ensuring
its confidentiality and integrity.
TBH_UiTM
Johor
REFERENCES
Madura (2018):
 Savings account pg. 484
 ATM pg. 483
 Fixed deposit pg. 484
 Current/ Demand account pg. 483
 NCD pg. 140
TBH_UiTM
Johor
REFERENCES
■ Madura, J. (2018). Financial Markets and
Institutions. Cengage Learning.
■ Study manual. Monetary Economics and the
Malaysian Financial System. IBBM.
■ Materials from i-learn, UiTM Aug 2017.
■ www.bnm.gov.my

TBH_UiTM
Johor