Kinds

of Deposit
Reporters:

Greg Peligro
Wharen Perez
What Is a Deposit?
• A deposit is a financial term that means
money held at a bank.

• A deposit is a transaction involving a transfer

of money to another party for safekeeping.

• However, a deposit can refer to a portion of

money used as security or collateral for the
delivery of a good.
How a Deposit Works?
A deposit encompasses two different meanings. One kind of deposit involves a
transfer of funds to another party for safekeeping. Using this definition, deposit refers
to the money an investor transfers into a savings or checking account held at a bank
or credit union.

In this usage, the money deposited still belongs to the person or entity that deposited
the money, and that person or entity can withdraw the money at any time, transfer it to
another person’s account, or use the money to purchase goods.

Often, a person must deposit a certain amount of money in order to open a new bank
account, known as a minimum deposit. Depositing money into a typical checking
account qualifies as a transaction deposit, which means that the funds are immediately
available and liquid, without any delays.

The other definition of deposit refers to when a portion of funds is used as a security or
collateral for the delivery of a good. Some contracts require a percentage of funds paid
before the delivery as an act of good faith. For example, brokerage firms often require
traders to make an initial margin deposit in order to enter into a new futures contract.
Special Considerations
When an individual deposits money into a
banking account, it earns interest.

This means that, at fixed intervals, a small

percentage of the account's total is added to the
amount of money already in the account.

Interest can compound at different rates and

frequencies depending on the bank or
institution.
Types of Deposits
• Demand Deposit

is a conventional bank and savings account.

•Time or Term Deposit

are those with a fixed time and usually pay a

fixed interest rate, such as a certificate of
deposit (CD). These interest-earning accounts
offer higher rates than savings accounts
 Demand Deposit
• Saving Account
► for normal person savings

► is an interest-bearing deposit account held at a

bank or other financial institution. Though these
accounts typically pay a modest interest rate,
their safety and reliability make them a great
option for parking cash you want available for
short-term needs.
• Current Account

► opened by businessmen who have a higher

number of regular transactions with
the bank. It includes deposits, withdrawals,
and contra transactions. It is also known as
Demand Deposit Account. Current
account can be opened in co-
operative bank and commercial bank.
 Time Deposit
• Fixed Deposit

where a bulk of money deposits in

bank for high rate of interest.
• Recurring Deposit

where a monthly fixed amount has

been given to bank or post office
for saving.
Fixed Deposit
is a type of savings/investment account that promises
the investor a fixed rate of interest. In return, the
investor agrees not to withdraw or access their funds
for a fixed period of time.

In a fixed deposit investment, interest is only paid at

the very end of the investment period. Since the
investment term and interest rate are fixed, you can
easily calculate the interest you will earn at the end of
any fixed deposit investment.
How do fixed deposits work?
When you invest in a fixed deposit
investment, you have the option to choose a
tenure (one month, three months, six months,
one year, etc.) and not touch it for ‘that’
period of time. These tenures can vary
anywhere from one month to five years.

Each tenure comes with a predetermined

interest rate.
What happens when you
withdraw your funds before
the tenure ends?

If you withdraw your funds before the fixed

deposit tenure ends, you could lose part – or all
– of your interest.
Kinds of Fixed Deposits
Standard Fixed Deposits
These are offered for tenures ranging from 7 days to 10 years. The
longer the tenure, the higher the interest earned. The rate of
interest is unaffected by market fluctuations because it’s set at the
time of creation of the FD.
Special Fixed Deposits
These funds are invested for specific time periods. If you leave the
money untouched for the specified period, you will earn higher
interest on it than the interest paid out for Standard FDs.
Tax Saver Fixed Deposits
These are long-term FDs. Generally, your investment is
completely locked down for a period of five years. But, you still get
the benefit of tax deduction through these FDs. The principal
amount you invest in tax saver FDs are exempt from taxation,
with an upper limit of Rs.1.5 lakhs per FD.
Regular Income Fixed Deposits
If you have limited income and depend on the interest from bank
deposits for your monthly expenses, this type of FD is your best bet.
You can choose to have the interest paid out either monthly or
quarterly.
Cumulative Fixed Deposits
If you do need the interest amounts for regular expenses, you can
opt to add the returns back to the FD, compounded either monthly
or quarterly. The next interest cycle will include the added amount,
earning you more on your investment.
Flexi Fixed Deposits

These are FDs linked to your savings account. You can create an
FD with an initial deposit and link it to your savings account. You
can also set a cap on your savings account and any excess will be
transferred to the FD.
What are the advantages
of fixed deposits?
Low-risk.
Your money is insured.

Higher interest rates.

You can easily withdraw

your money.
What’s the difference between a fixed
deposit account and a savings
account?
A fixed deposit account is similar to a savings accounts, in
that they’re both low-risk options to grow your money.
However, a major difference between the two is the interest rates
offered. Fixed deposit accounts generally offer much higher
interest rates, around 3% to 4% p.a. Savings accounts, on the
other hand, usually offer interest rates below 2% p.a.
Some savings accounts do have interest rates similar to (or higher
than) those of fixed deposit accounts, but they come with a few
conditions – you may have to deposit a high amount of savings,
use your account to pay a certain number of bills or spend a
minimum amount with your linked credit/debit card every month.
 Recurring Deposit
A recurring deposit is a special kind of term deposit offered
by banks 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.
This deposit matures on a specific date in the future along
with all the deposits made every month.
Recurring deposit schemes allow customers an opportunity
to build up their savings through regular monthly deposits
of a fixed sum over a fixed period of time. The minimum
period of a recurring deposit is six months and the
maximum is ten years.
When the recurring deposit 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. Interest is compounded on quarterly basis in
recurring deposits.
Other Example of a Deposit
Deposits are also required on many large purchases, such
as real estate or vehicles, for which sellers require
payment plans. Financing companies typically set these
deposits at a certain percentage of the full purchase
price, and individuals commonly know these kinds of
deposits as down payments.

In the case of rentals, the deposit is called the security

deposit. A security deposit covers the costs of any
potential damage done to the property during the rental
period and is sometimes refundable.
 Thank
You for
listening
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