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Bank Deposits

Made By Gursheen Arora 08 Debanshi Shah 44 TYBMS A

Introduction
The term bank deposits are terms generally used for the money which a common person or a customer saves in a bank for future financial security. A deposit account is a current account, savings account, or other type of account, at a banking institution that allows money to be deposited and withdrawn by the account holder. These transactions are recorded in the bank's books, and the resulting balance is recorded as a liability for the bank, and represents the amount owed by the bank to the customer. Some banks charge a fee for this service, while others may pay the customer interest on the funds deposited. Some banks in the world are also there where people are charged for the money that the bank is going to keep safe or rather if the bank is made liable off to pay in accounting terms. Other bank on the other hand does not make the customers money static. After the money is deposited in the customers name in bank deposits the money is made fluid and invested. Later after a definite tenure the money is returned to the customer with some interest included with the principal amount. The interest rate is fixed previously by the banking companies so that no problem occurs during the disbursement of the money to the customers. In India, the legal and regulatory framework is controlled by Reserve Bank of India (RBI), which is the apex banking institution in the country. RBI controls and regulates the functioning of all the banking institutions in the country.

Types of Deposits
The various types of bank deposits are classified into the following categories

1. Current Account 2. Savings Account 3. Recurring Account 4. Time Deposits

1. Current Account A Checking Account is more commonly known as Current Account or a Transactional Account. The main feature of a transactional account is that the customer is allowed unlimited number of transactions at any given period of time, but unlike saving deposits they do not offer any interests on the deposits. The main objective of a current account is to enable the businessman to conduct their business transactions smoothly. Current account is of continuing nature and as such there is no fixed time period. Advantages of Current Account 1. Current account enables the businessman to conduct their business transactions smoothly. 2. The businessman can withdraw any amount at any point of time, without any restrictions on the number and the amount of withdrawals. 3. Current account facilitates the industrial progress of the country. Without the help of this account, businessmen would have difficulties in running their business. 4. Current account enables the account holder to obtain overdraft facility 5. The bank collects money on behalf of its customers and credits the same to their accounts. Disadvantage of Current Account 1. Money held in Current Account does not earns any interest 2. Bank collects service charges from the account holders.

2. Savings Account Commercial banks, co-operative banks and postal departments accept deposits by way of opening saving bank account. The saving bank account is generally opened by salaried persons or by the persons who have a fixed regular income. The main characteristics or features of saving account are:1. 2. 3. 4. 5. 6. 7. 8. The main objective of saving account is to promote savings. There is no restriction on the number and amount of deposits. Withdrawals are allowed subject to certain restrictions. The money can be withdrawn either by cheque or withdrawal slip. The rate of interest payable is very nominal on saving accounts. Saving account is of continuing nature. There is no maximum period. A minimum amount has to be kept on saving account. No loan facility is provided against saving account.

Advantages of Savings Account 1. Saving account encourages savings habit among salary earners and others who have fixed income. 2. It enables the depositor to earn income by way of interest. 3. It helps the depositor to make payment by way of cheques. 4. The bank offers number of services to the saving account holders. Disadvantages of Savings Account 1. There are restrictions on the number of withdrawals 2. No loan facility is provided against these accounts.

3. Recurring Deposits Recurring Deposits are a special kind of Term Deposits offered by banks in India which help people with regular incomes to deposit a fixed amount every month into their Recurring Deposit account and earn interest at the rate applicable to Fixed Deposits. It is similar to making FDs of a certain amount in monthly installments, for example Rs 1000 every month. This deposit matures on a specific date in the future along with all the deposits made every month. Thus, Recurring Deposit schemes allow customers with an opportunity to build up their savings through regular monthly deposits of fixed sum over a fixed period of time. When the RD account is opened, the maturity value is indicated to the customer assuming that the monthly installments will be paid regularly on due dates. If any installment is delayed, the interest payable in the account will be reduced and will not be sufficient to reach the maturity value. Therefore, the difference in interest will be deducted from the maturity value as a penalty. The rate of penalty will be fixed upfront. Tax Deducted at Source (TDS) is not applicable on RDs.

4. Fixed Deposits The account which is opened for a particular fixed period (time) by depositing particular amount (money) is known as Fixed (Term) Deposit Account. The term 'fixed deposit' means that the deposit is fixed and is repayable only after a specific period is over. The rate of return is higher than for savings accounts because the requirement that the deposit be held for an integer multiple of the term gives the bank the availability to invest it in a higher gain financial product class. The longest permissible term for FDs is 10 years. Generally, the longer the term of deposit, higher is the rate of interest. The main features of fixed deposit account are as follows:1. The main purpose of fixed deposit account is to enable the individuals to earn a higher rate of interest on their surplus funds (extra money). 2. The amount can be deposited only once. For further such deposits, separate accounts need to be opened. 3. The period of fixed deposits range between 15 days to 10 years. 4. A high interest rate is paid on fixed deposits. The rate of interest may vary as per amount, period and from bank to bank. 5. Withdrawals are not allowed. However, in case of emergency, banks allow to close the fixed account prior to maturity date. In such cases, the bank deducts 1% (deduction percentage many vary) from the interest payable as on that date. 6. The depositor is given a fixed deposit receipt, which depositor has to produce at the time of maturity. The deposit can be renewed for a further period. Advantages of Fixed Deposits 1. 2. 3. 4. 5. 6. Fixed deposit encourages savings habit for a longer period of time.. Fixed deposit account enables the depositor to earn a high interest rate. The depositor can get loan facility from the bank. On maturity the amount can be used to make purchases of assets. The bank can get the funds for a longer period of time. The bank can lend such funds for short term loans to businessmen.

7. Fixed deposits indirectly boost economic development of the country. 8. The bank can also invest such funds in profitable areas. Disadvantages of Fixed Deposits 1. The amount can be deposited only once. For further such deposits, separate accounts need to be opened. 2. Tax is deducted by banks on Fixed Deposits.