bank deposit accounts final

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Bank DepositAccounts

BySubhash NishadPGDM 3rd Term

Finance NCFM

PRISM SCHOOL OF BUSINESS &ENTREPRENEURSHIP

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Introduction

“deposits, are the money which

accepted by banks from customersto be held under stipulated terms

and conditions. Deposits are thusan instrument of savings”.

Definition:-” One of the most

important functions of any commercialbank is to accept deposits from thepublic, basically for the purpose of

lending. Because public are the3/5/12



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Gross Domestic Savings

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Financial savings of thehousehold sector

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c e u e o commerc abanks

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Safety of deposits

Depositor would want to be certainthat his/ her money is safe with thebank and at the same time, wants to

earn a reasonable return.

§ Regulatory framework for banking :-

§ Banking Regulation Act, 1949 (BR Act)

§ Deposit Insurance Corporation in 19623/5/12



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Deregulation of interestrates

• The process of deregulation of interest rates started in April 1992

• Now, banks have the freedom to fixtheir own deposit rates with only a

very few exceptions

• The RBI prescribes interest rates only

in respect of savings deposits and3/5/12



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Deposit policy

• The Board of Directors of a bank, alongwith its top management, formulatespolicies relating to :-

– rates of interest payable on each type

–

Special deposit schemes

– types of customers to be targeted

–

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Types of Deposit Accounts

• Demand deposits – deposits payable on demand through

cheque or Otherwise – Demand deposits serve as medium of

exchange ownership to one person toanother

– They have no fixed term to maturity.

• Time deposits :- – deposits which are not payable on

demand and on which cheques cannot3/5/12



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certificate of deposit

• It is a negotiable money marketinstrument and is issued indematerialized form.

• It is eligible financial institution for aspecified time period.

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Three categories of bankdeposits

1. Current Deposits – The primary objective of a current account

is to provide convenient operation facility

to the customer – Current deposits are non-interest bearing – It is for the smallest fraction.

2. Savings Bank Deposits – It accrues the fixed interest rate set by

RBI (3.5% as of Jan. 2010) – It is used for large segment (in small

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CASA deposits

(Current Account and Savings Accountdeposits)

It offers to :-• salary accounts to companies• encouraging merchants to open

current accounts• cash-management facilities

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Market share of CASA

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3 T D it



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3 .Term Deposits

– It is a deposit received by the Bank for afixed period

–

Interest is paid on term-deposits, either onmaturity or at stipulated intervalsdepending upon the deposit scheme

– term-deposit for a minimum period of 7days

–

Term Deposit Accounts can be opened by3/5/12



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Conti….

• It includes :- – Re-investment deposits :-the interest is

compounded quarterly and paid on

maturity, along with the principalamount of the deposit

– Recurring deposits:- under which a fixedamount is deposited at regular intervals,• These deposits are usually targeted at

persons who are salaried or receive otherregular income

• It can be opened for anr period of 6 to 1203/5/12



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Strategies of mobilizingdeposits

• To maximize their profits, commercialbanks always attempt to mobilizesavings at the lowest cost possible –

CASA (cash account saving account) – Staff members posted to educate

customers about their rights and obligation – personalized banking relationship (CRM) – Senior citizens/pensioners have become an

important category of customers to betargeted by a bank

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Common Guidelines of Opening and



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Common Guidelines of Opening andOperating Deposit A/C

• Due Diligence Process –

"Know Your Customer" (KYC) guidelines issued byRBI

• person's identity,

• occupation,

•

sources of income,• location.

• recent photographs of people

• Current address

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To promote financial inclusion in rural areas / tribal areas,KYC norms have been relaxed for below the poverty line(BPL) families



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Conti…

• Minimum Balance – 'No-frills Accounts(only for BPL)

• Transparency – the bank may specify charges for issue

of cheques books, additional statementof accounts, duplicate passbook, folio

charges, etc• Eligibility• Requirement of PAN (Permanent

Account Number)•

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Operation of Special Classes of Deposit A/CHolders

• Minors' Accounts :Savings bankaccounts can be opened by minorsalong with their guardians.

• Account of illiterate/visuallychallenged persons: bank opens the

A/c in the presence of a mutuallyknown witness.

•

Deposit schemes for Senior Citizens3/5/12



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Deposit Related Services

• Customer Information• Interest Payments

– Savings bank accounts –

Term deposits – Tax deducted at source (TDS)

• Premature Withdrawal of Term Deposit

•

Premature Renewal of Term Deposit• Advances against Deposits

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Settlement of Dues inDeceased Deposit A/C

• If the depositor has registerednomination with the bank

• In the absence of nomination, thebank will pay the amount outstandingto all legal heirs against joint

application and on receipt of thenecessary documents, including courtorder.

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Stop payment facilities

• The Bank will accept 'stop payment'instructions from the depositors inrespect of cheques issued by them.

Charges, as specified, will berecovered.

Dormant Accounts :-

Accounts which are not operated for aconsiderable period of time (usually 12/24months• Such accounts can be used again on an

activation request to the bank3/5/12



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Safe Deposit Lockers• This facility is not offered through all

bank branches

– Safe deposit lockers may be hired by an

individual (not a minor) singly or jointlywith another individual.

•

Redress of Complaints andGrievances : if customer has anycomplaint regarding to service of thebank ,so has authority to approch. – If bank doesn’t response he has a right3/5/12



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Non Resident indians

• Definition according to FEMA 1999 : – Non-Resident Indian National (i.e. Non-

resident Indian holding Indian passport)

• Indian citizens who proceed abroad foremployment

• Indian citizens working abroad for WTO.WHO, IMF and so on

•

Officials of Central and State Governmentsofficers .

– Persons of Indian Origin (i.e., Non-residents holding foreig passports)

» PIO is defined as a citizen of any country .3/5/12

Depos t Serv ces O ere to



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Depos t Serv ces O ere toNRI

•

Non Resident Ordinary Accounts(NRO) – These are Rupee accounts and can be

opened by any person resident outside

India – it is basically a domestic account of an

NRI which help him get credits whichaccrue in India

– NRO accounts can be opened :-• savings account

• current account

•

Term-deposit accounts3/5/12



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Conti….

• Non-Resident (External) RupeeAccounts( introduced in 1970) – Any NRI can open an NRE account with

funds remitted to India through a bankabroad.

– Interest rates on NRE accounts aredetermined by the RBI, for both savings

and term deposits• Foreign Currency Non Resident Account

(Banks) May 15, 1993 –

NRI can opened a/c in these currencies:3/5/12



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Deposit Insurance

• Deposit Insurance and CreditGuarantee Corporation of India(DICGC)

• Deposit insurance helps sustainpublic confidence in the bankingsystem through the protection of

depositors• DICGC is a wholly-owned subsidiary

of the RBI

Banks insured by the DICGC3/5/12



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Features of the DICGC

• When is DICGC liable to pay? – A bank goes into liquidation – A bank is merged with another bank –

In the event of a bank failure• Methods of protecting depositors'

interest:-

(i) by transferring business of the failedbank to another sound bank (in case of merger or amalgamation)

(ii) where the DICGC pays insurance

proceeds to depositors (insurance pay-3/5/12



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Types of deposit covered byDICGC

• Deposits of foreign Governments• Deposits of Central/State

Governments• Inter-bank deposits;• Deposits of the State Land

Development Banks with the State

co-operative bank• Any amount due on account of any

deposit received outside India

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• Maximum deposit amount insured bythe DICGC:- – Rs100,000 for both principal and

interest amount• Cost of deposit insurance• Premium charged and claims paid by

DICGC:- – The premium rates charged by DICGC

were raised to Re 0.10 per deposit of Rs.100 with effect from April 1, 2005

• Withdrawal of insurance cover3/5/12



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bank deposit accounts final

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