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Types of accounts

TYPES OF DEPOSITS

Form of Deposits
Demand deposits Current accounts, savings accounts up to a specified limit and call deposits. Time deposits Fixed deposits, notice deposits (i.e., payable after a notice period) and recurring/cumulative deposits.

Operating accounts
Include revenues (tuition, fees) expenditures (labor related costs, supplies and services), and transfers.

Current Accounts
Current accounts suit the requirements of big businessmen, joint stock companies, institutions, public authorities and public corporations, etc., whose banking transactions happen to be numerous on every working day.

Characteristics of a current account


1. A current account is meant for the convenience of customers 2. As the banker undertakes to make payments and to collect the bills, drafts, cheques, etc., any number of times daily, the operating cost, i.e., the cost of bank personnel involved in current account is considerable. The Reserve Bank directive prohibits the payment of interest on current account.

3. Since May 1983, banks have been permitted to pay interest on balances lying in current accounts in the name of a deceased depositor from the date of death of the depositor till payment to the legal heirs. Interest on such amount shall be payable at savings bank deposit rate.

4. Banks make no charge for keeping an account provided the balance maintained is sufficient to compensate the bank for work involved. 5. A current account carries certain privileges which are not given to a savings bank account-holder, e.g., i) Third party cheques with endorsement may be deposited in the current account for collection and credit. ii) Overdraft facilities are given is case of current accounts only. iii) The loans and advances granted by the banks to their customers are not given in the form of cash but through the current accounts. Current accounts thus earn interest on all types of advances by the banker.

Savings Accounts
Savings accounts are mainly meant for nontrading customers who have some potential for saving and who do not have numerous transactions entering their account. Salaried classes of the lower and middle income group, small traders and farmers mainly open such accounts.

Who can open a Savings Accounts?


1. By a person on his/her own behalf. 2. By more than one person payable to any one or more of them or survivor or survivors. 3. By a guardian on behalf of minor, in which case a declaration as to the date of birth of the minor should be obtained from the guardian. 4. By the minor himself/herself for reasonable amounts provided the minor produces satisfactory proof about his/her date of birth.

5. By one person for another person with the stipulation that the deposit can be withdrawn by the latter only on his or her attaining the majority or marriage or some other specified time. 6. By Secretaries, Treasurers, Managers or other officers of non-trading concerns such as schools, clubs, hospitals, religious and charitable institutions. 7. Savings Bank Account in the name of Trading Concern (be it a proprietorship, firm or joint stock company) can be opened for placing their special funds such as Provident fund etc. but not for conducting trade.

Fixed Deposit Accounts


Fixed deposits or term deposits are accepted for a period at a fixed rate of interest agreed upon, depending upon the period for which they are accepted. At the end of the fixed period, the depositor may either withdraw the amount or renew the deposit for a further fixed period.

Apart from the traditional type of fixed deposits, banks now offer different types of deposit schemes to meet diverse needs of the public and to attract different classes of savers in the community. Such schemes include recurring/cumulative deposits reinvestment plan deposits, monthly income plan, retirement income plan, child education plan, marriage plan, housing loan linked deposits, etc

Notice Deposit
Notice deposits are time deposits with-drawable at a certain notice to be given by the depositor. The notice in writing may have to be given 15 days or more in advance before the money can be withdrawn. Deposits requiring longer notice carry a higher rate of interest than those requiring shorter notice.

Recurring Deposit or Cumulative Deposit Accounts


Intended to inculcate the habit of savings on a regular basis as an inducement is offered in the form of comparatively higher rate of interest.