Banking Awareness 56: Bank Deposits and Accounts.

Are you willing to know the detailed information about the Bank Deposits and Accounts? Here is the article which provides you the detailed information about the Bank Deposits and Accounts. Bank deposits consist of money placed into banking institutions for safekeeping. These deposits are made to deposit accounts such as savings account, checking accounts and money market accounts.

Banks are called as custodians of public money and mobilization of the deposits from the public which is the most important function of the commercial banks. Mainly, there were two types of deposits such as Time deposits and Demand Deposits.

These are some of the Types of Deposits accounts in India, they are:-

Time Deposits:-

When money is deposited with a "tenure", it cannot be withdrawn before its maturity which is fixed at a particular time. Such deposits are called  "Time Deposits" (or) Term deposits". The best example for the Time De[posit is Fixed Deposit. All the time Deposits are eligible for interest payments. The 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.

On the basis of their nature, time deposits may be of three types are as follows:-

Fixed Deposits:-

A Fixed rate of interest which is paid at fixed, regular intervals.

Re-Investment Deposits:-

Interest is compounded quarterly and paid on maturity, along with the Principal amount of the deposit.  In the Flexi Deposits amount in savings deposit accounts beyond a fixed limit is automatically converted into term deposits.

Recurring Deposits:-

A 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.

Demand Deposits:-

If the funds deposited can be withdrawn by the customer at any time without any advanced notice to banks; it is called a demand deposit. One can withdraw the funds from these accounts any time by issuing a cheque, using ATM (or) Withdrawal forms at the bank branches. The MOney as a demand deposit is liquid and can be encashed at any time. The ownership of demand deposits can be transferred from one person to another through cheques or electric transfers.

As mentioned above, there were two types of demand deposits such as Saving Accounts and 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, savings and term deposits. They provide convenient operations facilities to the individual and firm. The cost of maintaining the accounts is high and banks ask the customers to keep a minimum balance.

Saving Accounts:-

Savings Accounts are subjected 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. 

CASA Deposits:-

CASA Deposits refers to Current Savings as well as Saving Account Deposits. As an aggregate, the CASA deposits are low-interest deposits for the banks which are compared to the other types of deposits. So the banks tend to increase the CASA deposits and for this, they offer various services such as salary accounts to companies and encouraging merchants to open current accounts and use their cash-management facilities.

NRO, NE(E)RA and FCNA(A) Accounts:- 

There were several kinds of accounts which are available for Nonresident Indians, Persons of Indian Origin and Overseas Citizens of India. They are as Follows:-

Non Resident Ordinary Accounts:-

Any person resident outside of India can open this account. Normally, when a resident becomes a non-resident, his domestic rupee account gets converted into the NRO Account. This helps NRI to get his credits which accrue in India.

Non-Resident (External) Rupee Account:-

This account was introduced as NRE Scheme in 1970. It's a Rupee account and the NRI can remit money to India from the funds aboard. This means that depositors are exposed to currency rates risk.

Foreign Currency Non-Resident Account:-

It was first introduced in 1993 and it replaced the existing FCNR Scheme. This account is opened by the NRIs in 6 designated currencies as follows:-

Deposit Insurance in India:-

In India, the bank deposits are covered under the insurance scheme which is provided by DICGC. when a bank covered by DICGC fails, (or) undergoes liquidation or is merged with another bank. the DICGC pays the amount due to depositors such as the officially appointed liquidator in a time-bounded manner.