Types of Different Bank Deposits in India, Various Bank Deposits. Types of Bank Deposits like Current Deposit, Fixed Deposit, Recurring Deposit, Term Deposits etc. After Providing Various Terms of Banking – Know Their Actual Meaning and Banking in India – A comprehensive list of all Banks today we are providing Types of different bank Deposits in India.
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Types of Different Bank Deposits in India
Deposit Rate :-
In deposit terminology, a term Deposit Rate refers to the amount of money paid out in interest by a bank or financial institution on cash deposits.
Banks pay deposit rates on savings and other investment accounts.
Current deposit :-
Also called demand deposit current deposit can be withdrawn by the depositor at any time by cheques. Businessmen generally open current accounts with banks Current accounts do not carry any interest as the amount deposited in these accounts is repayable on demand without any restriction.
The Reserve bank of India prohibits payment of interest on current accounts or on deposits upto 14 Days or less except where prior sanction has been obtained. Banks usually charge a small amount known as incidental charges on current deposit accounts depending on the number of transaction.
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Fixed deposit :-
The term of ‘Fixed deposit’ means deposit repayable after the expiry of a specified period . Since it is repayable only after a fixed period of time, which is to be determined at the time of opening of the account, it is also known as time deposit.
Fixed deposits are most useful for a commercial bank. Since they are repayable only after a fixed period, the bank may invest these funds more profitably by lending at higher rates of interest and for relatively longer periods. The rate of interest on fixed deposits depends upon the period of deposits. The longer the period, the higher is the rate of interest offered.
The rate of interest to be allowed on fixed deposits is governed by rules laid down by the Reserve Bank of India.
Savings deposit / Savings Bank Accounts :-
Savings deposit account is meant for individuals who wish to deposit small amounts out of their current income. A saving account can be opened with or without cheque book facility. There are restrictions on the withdrawls from this account.
Savings account holders are also allowed to deposit cheques, drafts, dividend warrants, etc. drawn in their favour for collection by the bank. To open a savings account, it is necessary for the depositor to be introduced by a person having a current or savings account with the same bank.
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Recurring Deposits:-
Under this type of deposit,the depositor is required to deposit a fixed amount of money every month for a specific period of time . Each installment may vary from Rs.5/- to Rs.500/- or more per month and the period of account may vary from 12 months to 10 years. After the completion of the specified period, the customer gets back all his deposits along with the cumulative interest accrued on the deposits.
Miscellaneous Deposits :-
introduced several deposit schemes to attract deposits from different types of people,like Home Construction deposit scheme, Sickness Benefit deposit scheme, Children Gift plan, Old age pension scheme, mini deposit scheme ,etc.
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There are two types of deposits:
Demand deposits:-
The money we keep in our saving accounts is like a medium of exchange and this is called Demand deposits. This is because ownership of this deposit may be transferred from one person to another via cheques or electronic transfers.
There is no fixed term to maturity for Demand Deposits.
Time Deposits:-
If we deposit our money has an FD in the bank it becomes a Time Deposit on which NO cheque is drawn. They are paid on maturity at a particular time.
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Current Account and Savings Accounts:-
Difference between Current Account and Saving Accounts:-
The basic objective of a Savings Bank Account is to enable the customer save his / her liquid assets and also earn money on that saving. The Savings banks Accounts are preferred by individuals and provide liquidity for private and small businesses sometimes. On the other hand the current account is basically a transactional account which is preferred by business people.
The basic objective of the current accounts is to provide flexible payment methods to the business people and entities. These payment methods include special arrangements such a overdraft facility, accommodation of standing orders, direct debits, offset mortgage facility.
1. Transactions: Usually saving accounts have low transactions while current accounts have large transactions.
2.Handling: Savings accounts involve personal handling of assets, while current accounts are aimed to make the account holder free of personal handling of liquid funds. The current account facility helps the business to run without hurdles due to non availability of funds and short term deficits.
3.Interest Income: Usually the current accounts don’t earn interests. The saving accounts earn 3.5% interest at present in India. The interest is compounded half yearly. (Please note that in case of death of the current account holder his legal heirs are paid interest at the rates applicable to Savings bank deposit from the date of death till the date of settlement)
4. Overdrafts: As discussed above saving accounts have no overdraft facility, current accounts have. The money can be borrowed for short term and to be paid back with interest.
5.Minimum Balance: Usually saving accounts need a minimum balance in the banks to keep the account active (however No Frill accounts require either nil or low minimum balance to be maintained).
In current accounts there are no minimum balance requirements.
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CASA Deposits:-
CASA Deposits refers to Current Account Saving Account Deposits. As an aggregate the CASA deposits are low interest deposits for the Banks compared to other types of the deposits. So 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.
The Bank is High CASA ratio (CASA deposits as % of total deposits) are in a more comfortable position than the Banks with low CASA ratios , which are more dependent on term deposits for their funding, and are vulnerable to interest rate shocks in the economy, plus lower spread they earn.
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Term Deposits:-
Term Deposits are of three kinds:-
Fixed deposits: A fixed rate of interest 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: 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.
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NRO, NE(E)RA and FCNA(A) Accounts:-
There are several kinds of accounts available for non resident Indians , Persons of Indian Origin and Overseas Citizens of India. They are as follows:-
1.Non Resident Ordinary Accounts: (NRO): 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 the NRI to get his credits which accrue in India, for example rent or interest from investments.
2.Non-Resident (External) Rupee Account: (NR(E)RA: 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 abroad. This means that depositor is exposed to the Currency rates risk.
3. Foreign Currency Non-Resident Account: (FCNR) Foreign Currency Non-Resident Account Bank or FCNR (B) was first introduced in 1993. It replaced the existing FCNR (A) scheme. This account is opened by the NRIs in 6 designated currencies as follows: 1.US Dollar (USD) 2.Great Britain Pound (GBP) 3.Euro (EUR) 4. Japanese Yen (JPY) 5.Canadian Dollar (CAD) 6.Australian Dollar (AUD).
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Hi
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Thank You.
TDS provisions with reference to the various kinds of deposits – if explained – would help the auditors of banks and particularly the staff / consultants attending statutory audit of banks.