UNIT-II

BANK DEPOSIT ACCOUNTS

 Introduction To Bank Deposits,
 Types Of Deposit Accounts,
 Strategies Of Mobilizing Deposits,
 Common Guidelines Of Opening And Operating Deposit
Accounts,
 Deposit Related Services,
 Deposit Services Offered To Non-resident Indians,
 Deposit Insurance
 Lecture outcomes
• To classify deposit accounts
• discuss the products and services offered by
commercial banks
• summarize the role played by commercial
banks in financial inclusion
Banks took a haircut of 69 per cent while resolving
IBC cases: Report
 Types of deposit
• Time Deposits
Fixed deposits
Recurring deposits

• Demand deposits
Current Account
Saving Accounts
• Savings Account.
• Current Account.
• Salary Account.
• NRI Account.
• Recurring Deposit (RD) Accounts.
• Fixed Deposit (FD) Accounts.
Banking sector at enormous risk of asset-liability
mismatch: Pronab Sen
 Documents Required to Open a Savings Account

• Proof of identity - Passport, Driving license, Voter’s

ID card, etc.
• Proof of address - Passport, Driving license, Voter’s
ID card, etc.
• PAN card
• Form 16 (only if PAN card is not available)
• 2 latest passport size photographs
 • KYC NORMS
• The KYC norms were set by the Reserve Bank of
India in order to protect the account details of the
bank account holder from any sort of fraudulent
activity.
• In addition, it helps the bank monitor high-value
transactions and to curb any sort of financial scam,
money laundering, and so on.
 • KYC documents of the customer
• If the customer wishes to open a savings account.

• If in case the account has been held for many years, the customer
will have to submit a fresh set of his/her KYC documents.

• If the customer wishes to open a locker facility with the bank.

• If the customer has changed his/her name, signature, address, etc.

• If the bank requires any additional information about the customer.

• For high-value deposits at the bank.

 Saving interest rate
• https://www.bankbazaar.com/savings-account.h
tml

• There are a number of public sector as well as private

sector banks in India.

• Although each bank, generally has a different range of

interest rate for savings accounts, the rates usually

range from 3.5% p.a. to 7% p.a.

 Time deposit
• When money is deposited with a “tenure” , it
cannot be withdrawn before its maturity fixed at
a particular time. Such deposits are called
“Time deposits” or “Term deposits”.
• The most common example of Time deposits is
“Fixed Deposit”.
• All time deposits are eligible for interest
payments. Interest rate depends upon the
tenure and amount of deposit.
• This rate varies from bank to bank. The interest
rate is generally higher for time deposits of
longer tenure
 • Recurring deposits(RD)
• Fixed amount is deposited at regular intervals
for a fixed term and the repayment of principal
and accumulated interest is made at the end of
the term.
• These deposits are usually targeted at persons
who are salaried or receive other regular
income.
• A Recurring Deposit can usually be opened for
any period from 6 months to 120 months
• Public Provident Fund(PPF)

• The PPF scheme is aimed at all types of

investors. You can invest as little as Rs. 500 or
a maximum of Rs. 1.5 lakhs in a year
• Interest rates on PPF is currently 8%. This
makes it a better option than fixed deposits in
the current scenario
• The maturity amount is tax-free
• Lock in period for PPF is 15 years
• Premature closure of PPF is allowed after five
years. That’s if you can furnish proof of medical
or other emergency need
• Partial withdrawals are allowed penalty-free
after seven years
• The deposit amount in PPF is eligible for tax
deduction under Section 80C
 Which is better RD or FD or PPF?

• As a long term investment option, PPF is the

best option. ...
• While a PPF gives you 8% return, FDs offer
a maximum of 7.5% ( as of March 2017).
Further, FD interest is taxable, so your real
return will be less.
 Demand deposit
• If the funds deposited can be withdrawn by the
customer (depositor / account holder) at any
time without any advanced notice to banks; it is
called demand deposit.
• One can withdraw the funds from these
accounts any time by issuing cheque, using
ATM or withdrawal forms at the bank branches.
• The money as demand deposit is liquid and can
be encashed at any time.

• The ownership of demand deposits can be

transferred from one person to another via
cheques or electronic transfers.
• The money as demand deposit is liquid and
can be encashed at any time.

• The ownership of demand deposits can be

transferred from one person to another via
cheques or electronic transfers.
• There is no fixed term to maturity for Demand
Deposits.  
• The demand deposits may or may not pay
interest to the depositor.

• For example, while we get an interest on

savings accounts; no interest is paid on current
accounts.
 Current Account

• A current account is always a Demand Deposit

and the bank is obliged to pay the money on
demand.
• The Current accounts bear no interest and they
account for the smallest fraction among the
current, saving and term deposits.
• They provide the convenient operation facility
to the individual / firm.

• The cost to maintain the accounts is high and

banks ask the customers to keep a minimum
balance.
 • Saving Accounts

• Savings deposits are subject to restrictions on

the number of withdrawals as well as on the
amounts of withdrawals during any specified
period.
• Further, minimum balances may be prescribed
in order to offset the cost of maintaining and
servicing such deposits.  
• Savings deposits are deposits that accrue
interest at a fixed rate set by the commercial
bank
 Deposit Mobilisation
• Banks devise various strategies to expand the
customer base and reducing the cost of raising
deposits.

• This is done by identifying target markets, designing

the products as per the requirements for customers,
taking measures for marketing and promoting the

deposit products.
 Deposit Mobilization News
• Top private banks scale up on branches,
deposit mobilization

• https://www.moneycontrol.com/news/
business/companies/top-private-banks-scale-
up-on-branches-deposit-mobilisation-
4583791.html
• It is essential not only to expand the customer
base but also to retain it.

• This is done by
providing counselling, after-sales information
and also through prompt handling of customer
complaints.
• While the strategies for mobilizing bank
deposits vary from bank to bank, one common
feature is to maximize the share of CASA
deposits
• Senior citizens/pensioners have become an important category
of customers to be targeted by a bank. Products are developed
by banks to meet the specific requirements of this group.

• While banks endeavour to provide services to the satisfaction

of customers, they put in place an expeditious mechanism to
redress the complaints of the customers.
 strategies for driving bank
deposits
• 1. Analyze your best customers
• 2. Raise your deposit rate
• 3. Invest in your community
• 4. Make sure your local SEO is up-to-date
• 5. Use online advertising
• 6. Make sure your website is responsive
• 7. Tie in other services
• 8. Partner with reputable businesses
• 9. Segment your marketing
• 10. Offer additional incentive
 Live example
• https://www.icicibank.com/Personal-Banking/account-deposit/sa
vings-account/index.page

• https://www.hdfcbank.com/personal/products/accounts-and-
deposits/deposits

• https://www.rbi.org.in/Scripts/QuarterlyPublications.aspx?head=Quarterly%20Statisti
cs%20on%20Deposits%20and%20Credit%20of%20Scheduled%20Commercial%20
Banks
 Common Guidelines of Opening and
Operating Deposit Accounts
• To open a savings account, customers will be required
to meet certain eligibility criteria:
• Should be a citizen of India.

• The customer should be 18 years and above.

• In the case of minors, the parents or legal guardian of the minor

can open the account on their behalf.

• The applicant is required to have valid identity and address

proof that is Government approved.

 Documents required
• Proof of identity - Passport, Driving license,
Voter’s ID card, etc.
• Proof of address - Passport, Driving license,
Voter’s ID card, etc.
• PAN card
• Form 16 (only if PAN card is not available)
• 2 latest passport size photographs
• What documents are required to open a PPF
account with State Bank of India (SBI)?
 Nomination form.

 Copy of Permanent Account Number (PAN) card.

 KYC details (address proof and identification proof)

 Passport-size photograph.

 PPF Form A (account opening form)

 Eligibility for PPF
• only by Indian citizens

• Only one account can be opened by an individual in his/her name. However, an

account can be opened on behalf of a minor.

• Only the mother or the father can open a PPF account on behalf of their minor child.
However, the mother and the father can’t open an account each on behalf of the
child.

• Grandparents are not allowed to open an account on behalf of their minor

grandchildren. However, in case the mother or father of the child passes away, the
grandparents can open an account as guardians.

• https://www.bankbazaar.com/saving-schemes/sbi-ppf-account.html
 Premature-withdrawal
• Premature withdrawal from a fixed deposit basically
means that the depositor is allowed to close the FD
before its term ends.
• However, fixed deposits which allow the facility
of premature withdrawal require depositors to pay a
penalty to banks
• https://www.paisabazaar.com/fixed-deposit/pre
mature-withdrawal-of-fixed-deposit/
 Dormant Account

• A Dormant Account is a banking term that

refers to an account of a customer which was
without any activity for a period of one years,
other than posting of the interest and/or service
charges
 When do bank accounts become
inactive/dormant?

• When you don’t transact through a bank account for

more than 12 months, that account gets classified as
an inactive account.
• If that particular account does not witness any
transaction for another 12 months, it is further
reclassified as dormant account. 
 Restrictions on inactive and dormant
accounts
• The restrictions on inactive/dormant account vary from
bank to bank. While some banks impose restrictions
on net banking, phone-banking and ATM transactions,
others may even restrict cheque transactions.
• For example, HDFC Bank does not allow ATM, phone
banking and net banking transactions in its dormant
accounts
 Communication from bank before
reclassification

• Banks are required to inform you at least three months

before the reclassification of your account. They are also
required to inform you about the procedure for re-activation
of your account.
• If you chose to reply to the bank and provide the reasons for
the non-operation of your account, your account will still
continue to be considered as an operative account for
another year
• However, if you still don’t transact through your account
during the extended period, your account will be classified
as dormant/inoperative account at the end of the extended
period.
• However, you will continue to receive interest on your
savings account balance even after your account gets
reclassified as a dormant or inactive account.
 How to reactivate your bank
account?
• Reactivating your accounts is very simple. You can simply
make a deposit or withdrawal transaction to reactivate
your inactive bank account.
• To reactivate your dormant account, submit a written
request for reactivation at your home branch. Remember
that your bank cannot charge you for reactivating the

account.
Bank of Baroda Launches Tiranga Fixed Deposit
Scheme; More Benefits For Senior Citizens

• https://www.outlookindia.com/business/
bank-of-baroda-launches-tiranga-fixed-
deposit-scheme-more-benefits-for-senior-
citizens-news-216724
Bank of Baroda Launches Tiranga Fixed Deposit
Scheme; More Benefits For Senior Citizens
 NRI Account
• An NRI Account refers to the accounts opened by an NRI or a Person of Indian Origin (PIO)
or Overseas Citizen of India (OCI), with a bank or FI authorized by the Reserve Bank of India,
to provide various banking services to NRIs.
• NRIs may open NRI Accounts to deposit their income which may originate either from India
or from any other country. The income source may be their employer or from an investment.
• Objectives to open NRI account may be investment, remittance to resident dependents,
payment of financial obligations, etc.
• An individual of Pakistan or Bangladesh nationality residing in India can open only one NRI
account with an authorized dealer bank if he fulfills the following conditions:
• He belongs to minority communities in these countries (viz. Christians, Hindus, Sikhs,
Buddhists, Jains, and Parsis), and
• He has been permitted a long-term visa or awaits the result of an application for a long-term
visa.
•
 Types of NRI Account
• NRO
• NRE
• FCNR
 Types of accounts
• An NRO or Non-Resident Ordinary Account
may be opened with earnings arising from
India. The source of income can range from
assets or investments in the form of rent,
dividends, interest, etc.
 Features
• Even though deposits can be in INR or any other foreign
currency, the withdrawals can only be in Indian rupees in an
NRO account.
• An NRO account can be operated jointly either with an Indian
Resident or an NRI.
• Interest earned on the income in an NRO account is liable for
taxation.
• Earned income from pension, rents, etc. can be sent through an
NRO account.
• The main purpose of an NRO account is to house funds from
the earned income in India or abroad.
 Non-Resident External (NRE)
Account
1. NRIs may initiate and maintain a Non-Resident External or NRE
Account from their income originating in their country of
employment/ residence. 
2. Here are some key features related to NRE Account:
1. The account shall be denominated in Indian Rupees.
2. An NRE account can be in the form of a Current account,
Savings account, Recurring Deposit account, or Fixed Deposit
account.
3. An NRE account can be operated jointly but only with another
NRI.
4. Deposits in an NRE account can be made of earnings from a
foreign country only and not of earnings made in India.
 Non-Resident External (NRE)
Account
1. Withdrawals can be made in the currency in which the NRI
resides in and therefore there is a possibility of amount
fluctuation.
2. Funds from one NRE account can be transferred to another
NRE or NRO account easily.
3. Income from the NRE account is tax-free as the principal
and interest amounts are exempted from taxation.
4. Investments in India can be made with the help of the NRE
(Non-Resident External) account.
 Foreign Currency Non-Resident
(Banks) Account
1. Foreign Currency Non-Resident (Banks) Account or FCNR-B comprises bank
deposits made by NRIs, PIOs, and OCIs. These deposits may be denominated in
any one of the foreign currencies prescribed by the Reserve Bank of India.
2. Here are some key points related to an FCNR (Foreign Currency Non-Resident)
account:
1. The currencies in which FCNR-B deposits may be held in an Account are – US
Dollars (USD), Great Britain Pound Sterling (GBP), Euro (EUR), Singapore
Dollar (SGD), Hong Kong Dollar (HKD), Canadian Dollar (CAD), Australian
Dollar (AUD), Swiss Franc (CHF) and Japanese Yen (JPY).
2. Money can be deposited in an FCNR account in any currency approved by
RBI.
3. FCNR accounts are considered to be term deposit accounts and not savings
accounts.
4. Interest rates vary from the tenure of deposit and currency deposited in the
FCNR account.
1. The rate of interest is fixed in an FCNR account and does not fluctuate
throughout the deposit tenure.
2. In case of change in residential status, an account can be held till maturity but
the interest rate may fluctuate as per bank guidelines.
3. An FCNR account can be operated jointly either with a close Indian resident or
an NRI.
4. FCNR Account tenure ranges from 1 year to 5 years.
5. Income from the FCNR account is tax-free as the principal and interest
amounts are exempted from taxation.
6. The rate of interest does not fluctuate in an FCNR (Foreign Currency Non-
Resident) account because of the deposits and withdrawals made in foreign
currencies.
Advantages and Core Benefits
of Opening NRI Account
• Enables Inward Remittances

• Assures Continuity of Income

• Enables Investment in India

• Avoidance of Exchange Rate Fluctuations

• Attractive Returns

• No Tax Liability

• Loan Facility
 deposit insurance
• DICGC to make payments to depositors of
17 co-op banks in October
• No need for Aadhaar, PAN for bank
accounts soon! Will CKYC be a boon or
bane for customers?
 deposit insurance
• Explained: Bank deposit insurance
programme and norms to access funds

• https://www.tjsbbank.co.in/pdf/
guideeng.pdf
 SWIFT code
• How it works????
• What was it’s role in PNB scam
 NEWS
• India has extended the duration of the
$400 million currency swap facility
extended to Sri Lanka, which is in dire
straits
 Cash management
• Banks offer businesses a wide range of cash or
treasury management services for smooth cash
inflow and outflow. Cash management services
include managing incoming money from customers
with receivable solutions and at Point-of-Sale
terminals. Services covered under cash management
include paying your vendors, investors, and
employees. As a business owner, you can avail of the
following types of cash management services in
banking.
 Point of Sale Solutions

• It consists of various payment methods that the digital world offers.

These include
• MPOS - a portable solution that can accept cash, cheque or card
payments
• EDC Terminal - accepts Rupay, Maestro, MasterCard and Visa
cards globally
• Payment Gateway - mobile optimized for payment options across all
devices
• Aadhaar Pay - facilitates cashless purchases through Aadhaar
number validated by thumbprint
• UPI - payment acceptance through UPI QR code on BHIM or UPI
app
 Receivables Management

• Cash transactions - customized multi-location cash pickup solutions, cash

counting and verification, documentation of each pickup
• Cheque collections – local and outstation collection, multi-location pickups,
documentation of each cheque, timely realization and clearance of cheques
• NACH Debit – using the National Automated Clearing House (NACH)
service of NPCI, businesses can handle low-value transactions of large
volumes, set up periodic repetitive payments, documentation
• E-collections – a virtual account solution that streamlines and simplifies,
seamless integration with business’ ERP system, documentation
• PACE – a secured website for online payments, customized forms,
documentation, tracking feature, e-tendering
 Payables Management

• Cheque printing – both at bank and customer premises, documentation

• Bulk payment – single payment file across payment modes, single debit for payroll,
multiple debits for vendors, MIS and documentation, same facility for DD issuance
• Cash delivery – services at the doorstep of businesses, safe and secure delivery to
authorized recipients, high frequency of delivery
 Banking services

1. Remittance of Funds.
2. Credit cards.
3. ATMs Services.
4. Debit cards.
5. Home banking.
6. Online banking.
7. Mobile Banking.
8. Accepting Deposit.
9. Priority banking.
10.Private banking.