CHAPTER 8

DEPOSIT
FUNCTION
ATIENZA, CYRIL ANNE CASTILLO, NICA ELLA
REPORTERS:
BALASBAS, STEPHEN PELAGIO, BENJIE
 CHAPTER 8

The Deposit Function

Deposits contribute the lifeblood of a banking institution.

It is for this reason that a bank must have substantial
amount of deposits to prove its worth in the financial
system. A bank will not succeed in its task of “dealing in
credit” without deposits of every little of it
 WAYS OF ENTICING A
DEPOSIT
 There are many ways that The developments in
banks employ to entice communication and
depositors intro bringing technology also enhance the
their excess funds for bank’s ability to attract
safekeeping. They make customers. Modern banking
their building imposing offers convenience to
enough to conjure the idea depositors through varied
of financial strength, hence, products and services done
a veritable attraction to electronically.
depositors.
 DEPOSITS DEFINED
Under the concept of bank credit, deposits are represented by
money or representation money entrusted to banks for
safekeeping. The term “deposit ” however, may also partake
of the meanings.

To a bank, deposits are money borrowed and makes the bank
a debtor. The depositors, on the other hand, can claim the
deposits at his pleasure and is therefore the creditor. Hence,
the bank can lend the deposits while the depositor does not as
yet claim these and earn interest on the loans granted.
 Deposits are usually
classified according to
the method of
withdrawal and
according to the way
TYPES OF they are created. Such
delineations are simply
DEPOSITS established to set
apart one type from
another in some
instances.
 TYPES OF DEPOSITS
Demand Deposits : This deposits are Time deposits: are those which can
those which are withdrawn upon the only be withdrawn after a certain period
of time or at a designated maturity. The
presentation of checks during banking
depositors place their excess funds as
hours. However, even when banks are
time deposits for varied purposes such
close for business, claims against
as to build up a fund for building their
such deposits may be made by the
homes, for Christmas shopping and
depositor through his checking
such other postponed consumption
account.
purposes.
 TYPES OF TIME DEPOSITS
Time certificate of deposit: This is
evidenced by a certificate to the effect
that the deposit can only be withdrawn
at maturity or after due notice of
withdrawal, usually thirty days, and
upon presentation and surrender of the
instrument.
Special time deposits: This type is
evidenced by written contract to
the effect that neither all nor part
may be withdrawn before the
maturity date or at least upon due
notice of at least thirty days.

Savings deposit: Savings deposits

are evidenced by a passbook and
can be withdrawn only upon due
notice of at least thirty days or
depending upon the individual bank’s
policy.
 All time deposits receive interest at varying rates. For example the
certificate of deposit may be given a higher rate than that of savings.
This due to the fact that the former is kept with the bank for a longer
period which will also allow its investment for long term
commitments.
 Primary ( or direct ) and
derivative deposits.

Direct or primary deposits: Derivative deposits:

are those which made “over
the counter” when the
depositor himself brings his
money and/ or checks and
other near cash items to the
bank and hands them to the
teller.
on the other hand, are created
from proceeds of loans. In this
instance, the borrower enters into
an arrangement that the bank
places the loan proceeds under a
current account from which he
can draw checks eventually.
 KINDS OF DEPOSITORS
The deposits may come from The banks may also
either individuals or deposit money with other
businesses and from the
banks on a reciprocal basis
government and its
instrumentalities and political
and it classified as
subdivisions. interbank deposits.

The deposits made by They may also consist

these depositors may be
either demand or time in
conformity with the method
of withdrawal.
of primary or direct
deposits or derived from
proceeds of loans.
MOTIVES OF DEPOSITORS

01 SAFETY 02 CONVENIENCE
The depositors place their
excess funds in the bank
When the depositor is
because they are aware that prompted by the
modern banks have fireproof conveniences offered
and burglarproof safes and through depositing.
vaults to keep money in.

03 EARNINGS OR INCOME 04 Accommodation

A person places his Businessmen deposit

money as time their money because
deposits if he is after of the special favors
earnings or income. they want from banks.
 Significance of Deposits to a Bank

When a bank can attract depositors at all levels, it will build up

available loanable funds on which it could earn interest.
Increased investments will accrue to the benefit of the
customers and the general public through improved banking
facilities and services.
The bank management will see to it that it does not only
retain the good depositors but also attract new ones.
Evidence of the stockholders' intention to invite depositors
and at the same time improve banking services could be
gleaned from the shift in the use of purely manual operations
to automation.
 The Deposit Function
The teller system employed by banks perform the operations
connected with the receipt of deposits and other allied activities
related to it. The bank, if relatively small sized, may employ a single
teller system where one tells performs both the receiving of deposits
and the paying out of checks and other instruments tellers who
perform separate tasks might be more practical and economical due
to e exchange for cash.
Modern banks have acquired many new methods to improve
service as well as a mechanized device to step up the bank’s
multifarious activities. For one thing, banks nowadays employ several
tellers in order to give maximum service benefits to their customers.
 THE RECEIVING
TELLER
The receiving teller
receives and verifies deposit
items and deposit slip, gives
proper receipt for the
deposit made, distributes
the items deposited, and
finally checks and proves
the day’s work.
In the receipt of the items deposited,
the receiving teller exercises due care
and diligence in examining the cash
and credit instruments so that he may
be relieved of the responsibilities
attached to his duties.
In regard to the currency, the teller is
responsible for:
1. Errors in counting the money
deposited
2. Presence of mutilated or
counterfeit money
For the credit instruments that the teller receives for deposit, he has to be careful in order to avoid
responsibilities in connection with :

01 Postdated Checks 02 Stale Checks

Checks which are dated Checks which are dated very

after the date of deposit. much earlier, about a month,
from the date of deposit
03 Material Alterations 04 Wrongly endorsed instruments.

May be on the date, the In case the instrument is not

endorsed according to the name
amount, the payee. appearing on its face, the teller
should require the depositor to
correct the wrong endorsement.
For both currency and credit instruments, the teller is responsible for:

Carelessness in adding deposit Carelessness in designating the account to

slips be credited

This refers to the proof It may happen that there are

sheets rather than the several depositors with
identical names. The teller
individual deposit must, therefore, see to it that
slips. the right person is duly
credited for the deposit.
 DEPOSIT SLIPS (TICKETS) AND DEPOSIT ITEMS

1. Deposit Slips – the forms filled in by the depositor when he makes

a deposit.
2. Deposit Items – comprises of cash and credit instruments or other
items and are distributed as follows:
a. The currency composed of notes and coins will be sent to the
cashier.
b. Checks drawn on the bank where the teller is employed are sent
to the bookkeeper.
c. Checks drawn on other banks are sent to the distributing section
or transit department for proper disposal.
d. Drafts and other items to be acted upon are sent to the
corresponding departments such as foreign, the loans and
discount, and others.
 The paying teller is sometimes alluded to
as the first teller.
The one who pays out cash in exchange
for checks and other instruments
THE PAYING necessitating encashment.

TELLER
In order that he may be relieved of
the responsibilities attached to his
duties, he examines the items
exchanged for cash in relation to :
The date of the check. He makes
sure that the check is neither post-
dated nor stale.
Wrong endorsement. The receiving
teller must be sure that the
endorsement is correctly effected
at the back of the instrument.
Crossed checks. Are of two kinds, either
crossed specially or generally.
Stop-payment order. The bank provides a
signal to indicate the “Stop Payment
Order”.
Insufficient funds. The paying teller must
also determine whether or not the drawer
of the check has sufficient funds to cover
the same.
Material alteration. This refers to
erasures or changes on the date, the
payee, or the amount in words and
figures.
Forgery. The concern of the paying
teller as he has access to the
depositor’s specimen signature before
payment.
Erroneous payment. A paying teller
should count the money to be paid at
least twice.
Supply of cash. A paying teller, through
constantly doing the same work, should
be in a position to know how much he
gets from the cashier to meet
requirements.
 OTHER TELLERS
As the bank grows in size and volume of business, it will also
have other tellers with specific functions aside from the
receiving and paying tellers. However, these tellers will also
have similar functions with only a few deviations. For example,
a mail teller will take care of deposits by mail. He therefore,
also goes through the operations of a receiving teller. Or a
teller is assigned to do nothing but change big bills into smaller
denominations or vice versa. Such teller also does the work,
sub-tellers are assigned, therefore, either to the receiving teller
or to the paying teller. Other personnel are also employed to
facilitate the work of the tellers.
 How to open a Bank Account
The prospective depositor approaches the counter marked
“New Current Accounts” and the officer behind the counter
will break the ice by saying: “May I help you?” then the
customer indicates his intention of opening a checking
account. The officer then inquires of the prospective
depositor if the latter is known to the bank officials, or
whether he could give as reference any person of good moral
character and credit standing in the community or within the
bank. The prospective depositor should also present valid
IDs. Upon satisfying the requirement, the applicant is then
given the necessary forms to fill out.
Opening a bank account is a relatively simple process. Here are the
general steps you can follow:

 Choose a bank
 Gather your documents
 Choose the type of account you want
 Visit a bank branch or apply online
 Fund your account
 Start using your account
 There are some significant
differences which the tellers must be
aware of and which the depositors
CURRENT VERSUS must know in order to keep his account
with the bank. Such distinctions will be
SAVINGS in the initial deposit, the service fees,
ACCOUNT the penalty for issuance of bouncing
checks, the age of depositors, the
minimum balances for purposes of
interest payments or imposition of
service charges, and others.
CHAPTER 8

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