You are on page 1of 11

Bank Deposits & Bank Loans

Deposit Account: A deposit account is a type of bank facility, offered by a banking/financial institution that allows money (cash or transfer) be deposited and withdrawn by the account holder on request, as per the rules of the institution.

Major types of Bank account: Current Accounts: A deposit account for business entity, allows more number of transaction & remittance. Savings accounts: Type of account basically used to promote savings habit of the individual Time deposit: Money deposited with bank for a pre-decided time period.

Banks have derived several deposit products from above three types, which includes: Savings Bank Current Account Recurring Deposits Term Deposit ( Intt Payback/Interest Accrual) Term Deposit (Coupled With Overdraft) Current Account in Foreign Currency Fixed Deposits in Foreign Currency Other misc. deposit accounts

Bank Loan: A loan is a type of debt. It is money or facility given by a financial institution to its customer which, increases purchasing power of the customer. A debt is created when a creditor agrees to lend a sum of assets to a debtor. In a loan, the borrower initially receives or borrows an amount of money, called the principal sum and repays an equal amount of money to the lender at a later time. In addition to the principal, interest/fee is also paid. In case of Non-fund based accounts, not money but facility is allowed & instead of interest, fees are charged. A company or individual's bank credit depends on both the borrower's capacity to repay and the overall amount of credit available in the banking system.

Types of loans Trade Credit ( Business Credit) Consumer Credit Trade credit Fund Based Non Fund Based

Fund Based Cash Credit Demand loans Term Loans (Long term/ short term) Bridge Loans Trust receipt Over draft Export Packing Credit

Non Fund Based Letter of Credit Bank Guarantee Deferred Payment Guarantees

Consumer credit Home Loans Car Loans Education Loans Consumer goods loans Credit card debt Personal loans Travel or leisure loans

Loan Payment Mechanism Simple interest method: Where borrower pays interest only on principle amount. Compounded interest method: In compounded interest method interest on interest is also paid along with interest on principle. Thus this method of repayment makes actual interest higher as compared to other method & this is the method used by banks for giving loans.

Thank You.