1. BANK DEPOSITS & DEPOSIT MANAGEMENT
Samir K Mahajan

2. Banks accepts deposits from the public.
Bank Deposits
Banks accepts deposits from the public.
Banks deposits are classified by type of customers, the tenure and its cost to the bank.
Based on these parameters, deposits can be classified as follows.
Demand Deposits
Time Deposits
Samir K Mahajan

3. cheques are readily accepted as a mode of payment.
Demand Deposits/ TRANSACTION ACCOUNT/PAYMENT DEPOSITS
Demand Deposits are repayable by the bank on demand from the depositors.
Such deposits facilitate the transfer of fund by deposit holders to third parties primarily through cheque and other forms ,
cheques are readily accepted as a mode of payment.
Samir K Mahajan

4. TYPES OF DEMAND DEPOSITS
Demand Deposits/ TRANSACTION ACCOUNT/PAYMENT DEPOSITS
TYPES OF DEMAND DEPOSITS
Non-interest bearing demand deposits /Current account
Interest bearing demand deposits/Saving Bank Account
Samir K Mahajan

5. Non-interest Bearing Demand Deposits /Current Account
Demand Deposits contd.
Non-interest Bearing Demand Deposits /Current Account
Non-interest bearing demand deposits are typically held by the individuals, businessman or government.
Explicit interest payments on these deposits are prohibited on these deposits in most countries.
In India, non-interest bearing demand deposits are maintained in current account
Businessmen, Firms or  Corporate depositors who carry out large number of transactions prefer current accounts for ease of operation
current accounts are never used for the purpose of investment or savings. 
Samir K Mahajan

6. These are quite volatile source of funds for the banks.
Demand Deposits contd.
Non-interest Bearing Demand Deposits /Current Account contd.
These deposits are the most liquid deposits, and there are no limits/restrictions on number or amount of transactions in a day
These are quite volatile source of funds for the banks.
  Cheque book facility is provided, and the account holder can deposit all types of the cheques and drafts in their name or endorsed in their favour by third parties. 
No interest is paid by banks on these accounts.  On the other hand, banks charge certain service charges on such accounts. 
Samir K Mahajan

7. Interest bearing demand deposits/Saving Account
Demand Deposits contd.
 Interest bearing demand deposits/Saving Account
Interest bearing demand deposits are held by individuals/households or certain types organisations say Trusts.
Similar to current deposits, these deposits are used by the purpose of transactions by deposits holders, and a major portion of these are volatile.
These are called saving bank account in certain countries including India. These deposits not only provide cheque facility but allow withdrawal of funds from the accounts
Samir K Mahajan

8. Interest bearing demand deposits/Saving Account contd.
Demand Deposits contd.
 Interest bearing demand deposits/Saving Account contd.
The deposits normally carry a low rate of rate of interest around 4 per cent, and are primarily meant for households savings who keep their earnings in these accounts for routine and other payments.   
 Most of the banks have rules for the maximum number and amount of withdrawal in a period but hardly any bank enforces these.  However, banks have every right to enforce such restrictions if it is felt that the account is being misused as a current account. 
Since the financial year , interest earned up to Rs. 10,000 in a financial year on Saving Bank accounts is exempted from tax. 
Samir K Mahajan

9. Time Deposits
Time deposits are deposits which are repayable after expiry of specified period varying from seven days to ten years or more.
TYPES OF Time DEPOSITS
Fixed /Term deposits
Recurring deposits
Reinvestment deposits
Accumulated deposits
Certificates of deposits
Fixed deposits under various schemes conceived and marketed by individual banks

10. Fixed Deposit or Term Deposits/ FD accounts
Time Deposits contd.
Fixed Deposit or Term Deposits/ FD accounts
Fixed deposits are deposited for a fixed period of time, and are not supposed to be withdrawn before expiry date.
However, in case of need, the depositor can ask for closing the fixed deposit prematurely by paying a penalty.
Interest rates are higher than any other deposits. The longer the period of maturity, higher is the rate of interest.
Banks   offer fixed deposits schemes with a wide range of tenures for periods from 7 days to 10 years.  
The rate of interest for fixed deposits differs from bank to bank.
 Usually a bank FD is paid in lump sum on the date of maturity. 
If one desires to get interest paid every month, then the interest paid will be at a marginal discounted rate. 
Samir K Mahajan

11. Recurring Deposit Account/ RD Account
Time Deposits contd.
Recurring Deposit Account/ RD Account
Recurring Deposit Accounts  are suitable for people who do not have lump sum amount of savings, but are ready to save an fixed amount on monthly instalment basis.
such deposits earn interest on the deposited at the rates similar to fixed deposits. Any default in payment within the month attracts a small penalty.   
are normally allowed for maturities ranging from 6  to 120 months.
some banks besides offering a fixed instalment recurring deposit , have also introduced a flexible / variable  recurring
withdrawal of accumulated amount is usually allowed however, penalty may be imposed for early withdrawals.   
These accounts can be funded by giving Standing Instructions by which bank withdraws a fixed amount on a fixed date of the month from the saving bank account of the customer (as per his mandate), and the same is credited to recurring deposits account.
Samir K Mahajan

12. Thus, interest gets interest.
Time Deposits contd.
Reinvestment Deposit
Re-investment deposit allows interest gets reinvested every quarter in term deposit till the date of maturity.
Interest is compounded every quarter, and reinvested to make the saving grow faster.
Existing term deposit accounts can freely be converted to reinvestment term deposit accounts and vice versa.
Thus, interest gets interest.
Samir K Mahajan

13. Accumulated Deposit is the time deposits for corporate customers.
Time Deposits contd.
Accumulated Deposit
Accumulated Deposit is the time deposits for corporate customers.
Under this product, customers can make additional deposit to their accounts at any time during the deposit term, and enjoy attractive interest rates which best suits enterprises’ demand for fund accumulation to implement their assets procurement plan or project investment in the future.
Accumulated deposits are safe way of ensuring growth of savings. Interest is accrued on monthly basis, and is paid to the same.
Samir K Mahajan

14. Certificates of Deposits
Time Deposits contd.
Certificates of Deposits
A certificate of deposit (CD) is a short-term fixed deposits issued by banks which can be transferable/tradable , and matures within one year.
It is intended that the CD be held until maturity, at which time the money may be withdrawn together with the accrued interest.
Fixed rates are common, but some institutions offer CDs with variable interests.
Certificate of deposit is a negotiable money market instruments giving investors greater flexibility in deployment of their short-term surplus funds.
Samir K Mahajan

15. TYPES OF BANK DEPOSITS IN DIFFERENT COUNTIES
Types of Bank Deposits in USA
Transaction or checking account
Demand Deposits Account (DDA)
Negotiable Order of Withdrawal (NOW) Account
Money Market Deposits (MMD) Account
Saving Account
Automatic Transfer Service Account
Certificates of Deposits (CD)
Samir K Mahajan

16. Types of Bank Deposits in USA contd.
Predominates type are:
Demand Deposits Account (DDA): Demand Deposits Account (DDA) is non-interest bearing checking account predominantly held by commercial units though individuals also can hold them. Similar to current account in India, it is also called basic checking account which require very low minimum balance, and in which unlimited number of check/cheque can be drawn. As the name suggests, withdrawal can be made on demand (without any advance notice). Charges are applicable to such accounts.
Negotiable Order of Withdrawal (NOW) Account: Negotiable Order of Withdrawal (NOW) Account is an interest bearing checking account (demand deposits) in which unlimited number of check/cheque can be drawn. Bank holding the NOW account must reserve the right to require at least 7 days’ notice period of withdrawal (which is rarely exercised). If balance in such account falls below a certain minimum level, service fee is charged.
Money Market Deposits (MMD) Account : Money Market Deposits (MMD) Account is basically short term deposit with limited cheque writing privilege and transaction (transfer). These accounts are not generally suited for day-to- day business transactions , given the restrictions on their use. Balances in such account are invested in short-debt in money market. If balance in such account falls below a certain level, service fee is charged. Rate of interest is higher than NOW Account. MMDs are primarily introduced to compete with money market mutual funds.
Samir K Mahajan

17. Types of Bank Deposits in USA contd.
Types Of Bank Deposits In Different Counties contd.
Types of Bank Deposits in USA contd.
Saving Account
Saving Account is intended to provide an incentive to holder to save money. Holders can usually make deposits and withdrawals, but usually cannot write cheque/check. Such account pays an interest higher than NOW account but lower than MMD account and certificate of deposits. A service fee will be charged if balance in such account falls below a certain level.
Certificates of Deposits
Certificates of Deposits are time deposits with rate of interest higher than regular saving account. CDs are similar to savings accounts in that they are insured and thus virtually risk-free. They are different from savings accounts in that the CD has a specific, fixed term (often monthly, three months, six months, or one to five years), and, usually, a fixed interest rate. It is intended that the CD be held until maturity, at which time the money may be withdrawn together with the accrued interest. A substantial penalty is imposed for an early /premature withdrawal.
Samir K Mahajan

18. Types of Bank Deposits in USA contd.
Types Of Bank Deposits In Different Counties contd.
Automatic Transfer Service Account
In Automatic Transfer Service Account, customer has both demand deposit account and saving account . On a general level, it can mean any automatic transfer of funds between two accounts of a customer. For example, a regular transfer from a checking account to pay off a bank loan, or a monthly transfer from a checking account to a savings account.
More specifically, it describes the overdraft protection provided when there is an automatic transfer of funds from a customer's savings account to his or her checking account when there are insufficient funds to cover unpaid checks or maintain a minimum balance. Ordinarily, the bank will transfer the exact amount of funds required to cover unpaid checks. The customer avoids any overdraft fees and all the hassle associated with returned checks.
Samir K Mahajan

19. Predominates type are:
Types Of Bank Deposits In Different Counties contd.
Types of Deposits in U.K
Predominates type are:
Current Account which provided a cheque-book but usually pay no interest. These accounts are primarily used to pay bill.
Deposits Account which pays interest , and is used primarily for short term saving.
Investment /Saving Account which pays higher interest, and is used primarily for long term saving. Notice of withdrawal is given in writing.
Samir K Mahajan

20. Types of Deposits in Canada
Types Of Bank Deposits In Different Counties contd.
Types of Deposits in Canada
Predominant types are:
Checking account/transaction account with a bank debit card and low interest rate
Saving account with higher interest rate subject to maintenance of minimum balance and restriction on number of withdrawal
Term Deposits
Guaranteed investment certificates which are term investments with higher interest rate but are not often redeemable (cashable) before maturity.
Samir K Mahajan

21. Predominates type are:
Types Of Bank Deposits In Different Counties contd.
Types of Deposits in U.K
Predominates type are:
Transaction Deposits/checking account/no interest deposit is primarily used not for saving but for business purpose
Non-transaction deposits /saving account deposits bears interest
Certificate of deposits
Term deposit account
Samir K Mahajan

22. NRI Account contd.
Non-Resident Ordinary Rupee Account (NRO Account)
NRO Accounts may be opened / maintained by NRIs/PIOs in the form of current, savings, recurring or fixed deposit accounts in which balances are denominated in Indian Rupees. Banks are free to fix the interest rates but in case of term deposits interest rates can not be higher than those offered on domestic rupee deposits .
 Permissible credits to NRO account includes transfers from rupee accounts of non-resident banks, remittances in permitted currency from foreign countries through normal banking channels, current income in India like rent, dividend, pension, interest, etc., sale proceeds of assets including immovable property acquired out of rupee/foreign currency funds or by way of legacy/ inheritance.
Eligible debits includes all local payments in rupees including payments for investments as specified by the RBI and remittance of current income of account holders outside India , net of applicable taxes of the account holder.
 NRI/PIO may remit account a maximum of USD one million per financial year from the balances held in NRO subject to payment of applicable taxes.
 The accounts may be held jointly with residents and / or with non-resident Indian.  The NRO account holder may opt for nomination facility.
Loans to non-resident account holders and to third parties may be granted in Rupees by Authorized Dealer / bank against the security of fixed deposits subject to certain terms and conditions.

23. NRI Account contd.
Non-Resident (External) Rupee Account (NRE Account)
 NRE Accounts may be in the form of savings, current, recurring or fixed deposit accounts by NRIs/PIOs in which balances are maintained in Indian Rupees.  Balances held in the NRE account are freely repatriable (i.e. can be transferred from India to NRIs’ residents countries. Banks are free to fix the interest rates but in case of term deposits interest rates can not be higher than those offered on domestic rupee deposits .
 Accrued interest income and balances held in NRE accounts are exempt from Income tax and Wealth tax, respectively.
Authorised dealers/ banks may allow overdrawings in NRE savings bank accounts up to a limit of Rs.50,000 for a period of maximum two weeks subject to certain conditions.
Permissible credits to NRE account includes inward remittance to India in permitted currency, proceeds of account payee cheques, demand drafts / bankers' cheques issued against encashment of foreign currency, proceeds of FDI investments, interest accrued on such accounts, interest on Government securities, dividends of mutual funds purchased by debit to the NRE/FCNR account of the holder, certain types of refunds, etc.
Eligible debits includes local disbursements, transfer to other NRE / FCNR accounts of eligible person, remittance outside India, investments in shares / securities/commercial paper of an Indian company, etc.
Loans up to Rs.100 lakh can be extended against security of funds held in NRE Account either to the depositors or third parties.

24. NRI Account contd.
Foreign Currency Non Resident (Bank) Account – FCNR (B) Account
 FCNR (B) accounts are only in the form of term deposits of 1 to 5 years. The  balance in such account can be in any freely convertible currency (either in Indian currency or foreign currency.
The interest rates are stipulated by the Department of Banking Operations and Development, Reserve Bank of India.  When an account holder becomes a person resident in India, deposits may be allowed to continue till maturity at the contracted rate of interest, if so desired by him.
 All debits / credits permissible in respect of NRE accounts, including credit of sale proceeds of FDI investments, are permissible in FCNR (B) accounts also.
 Loans up to Rs.100 lakh can be extended against security of funds held in FCNR (B) deposit either to the depositors or third parties.
An  NRI can open joint account with a resident close relative (as defined in Section 6 of the Companies Act, 1956). The resident close relative will be eligible to operate the account as a Power of Attorney holder in accordance with extant instructions during the life time of the NRI/ PIO account holder.

25. Resident Foreign Currency Account(RFC)
NRI Account contd.
Resident Foreign Currency Account(RFC)
 Returning NRIs /PIOs may open, hold and maintain with an authorised dealer in India a Resident Foreign Currency (RFC) Account to transfer balances held in NRE/FCNR(B) accounts.
Proceeds of assets held outside India at the time of return can be credited to RFC account.
The funds in RFC accounts are free from all restrictions regarding utilisation of foreign currency balances including any restriction on investment in any form outside India.
RFC accounts can be maintained in the form of current or savings or term deposit accounts, where the account holder is an individual and in the form of current or term deposits in all other cases.
RFC accounts are permitted to be held jointly with the resident close relative(s) as defined in the Companies Act, However, such resident Indian close relative as joint account holder shall not be eligible to operate the account during the life time of the resident account holder.

26. DEPOSIT INSURANCE in India
Deposit insurance is a measure implemented in many countries to protect bank depositors specially small depositors, in full or in part, against the risk of losing their savings in the event of bank’s inability to meet its liabilities/debt due.
The purpose of the scheme is
to protect depositors in case of bank failures
to instil the confidence of the depositors in the banking system
to help banks mobilise deposits which is catalyst to economic growth and development
to promote financial stability, and growth of the banking system
to avoid panic in case of bank run
Deposit Insurance was introduced in India in India is the second country in the world to introduce such a scheme - the first being the United States in 1933.
Samir K Mahajan

27. DEPOSIT INSURANCE CONTD.
The Deposit Insurance Corporation (DIC) Act was initially extended to the functioning of commercial banks. In the early 1960s, 287 banks got registered with it as insured banks which were reduced to 100 as a result of RBI’s policy of reconstruction and amalgamation of small and financially weak banks. In 1968, the DIC was amended to extend deposit insurance to 'eligible co-operative banks'.
1971 witnessed the establishment of another institution the Credit Guarantee Corporation of India Ltd (CGCI). The establishment of the CGCI was essentially in the realm of affirmative action to ensure that the credit needs of the hitherto neglected sectors, and weaker sections were met. The essential concern was to persuade banks to make available credit to not so creditworthy clients.
In 1978, the DIC and the CGCI were merged to form the Deposit Insurance and Credit Guarantee Corporation (DICGC).
With the financial sector reforms undertaken in the 1990s, credit guarantees have been gradually phased out, and the focus of the Corporation is again back to its core function of Deposit Insurance with the objective of averting panics, reducing systemic risk, and ensuring financial stability.
Samir K Mahajan

28. DEPOSITS MANAGEMENT
One of the main functions of banks is to accept deposits. Deposits are used for the purpose of lending. Since banks are using other peoples’ money to do business, it should make sure that it will be able to repay the deposits to the respective customers when they claim for it. The management of all this is called deposit management.
Samir K Mahajan