(1) Demand deposits
(2) Time /Term deposits
Demand deposits: -
Demand deposits are those deposits, which can be withdrawn on demand. Saving bank, current account and overdue deposits fall under this category. Customers having these accounts can withdraw their deposit s from the account at any time they desire.
Time/Term Deposits: -
Deposits, which are not payable on demand, are known as term or time deposits. "Term Deposits" or “Fixed Deposits” are deposits, where the depositor makes a lump sum deposit at one time for a fixed term and receives payment in future after the period for which the deposits have been kept. Rate of interest is contracted at the time of opening the account. Such deposits generally carry comparatively higher rate of interest depending on the time span In case a depositor wants prepayment i.e. payment before the due date, the amount is paid after leaving penalty.
Salient features of term deposits:
These deposits have a due date
It carries higher rate of interest
Interest is payable quarterly or compounded ever quarter as per the choice of the depositor.
Every deposit transaction is a separate contract
A time deposit receipt is not a negotiable instrument and, therefore, cannot be transferred by endorsement by a depositor in favour of another.
Banks accept term deposits for a minimum period of 7 days and maximum period of 120 months.
Deposits held under the following scheme are called time deposits.
1-Short deposit- Deposits accepted by banks for a period of less than 12 months are termed as Short deposits
2-Fixed deposit- Deposits accepted foe a period of over twelve months are treated as Fixed deposits.
3-Recurring deposits
4-Cash certificates
"Recurring Deposits” are like a Fixed Deposit Account. Banks introduce such deposit account to inculcate the habit of saving among people by offering higher rate of interest. Under such bank account, a depositor is required to deposit amount in pre-agreed equal monthly installments for a fixed period and the amount is paid in one lump sum, on maturity.
"Cash Certificates" are deposits, which are accepted in lump sum for a fixed period. On maturity, the principal plus interest compounded at quarterly intervals are repaid to the depositors as a lump sum. These deposits are issued a price less than the face value of the certificate for a certain period. On the date of maturity (which is mentioned on the certificate) the depositor gets the face value of the certificate.e.g if the face value of certificate is Rs.1,000/- and it is being issued say for a period of three years ,the bank may charge less than Rs 1000/- but the depositor gets the face value. The difference between the amount paid and received is the interest earned on the deposit.
Savings Bank Deposits:
Savings bank deposit account is primarily meant for developing the habit of saving among the public. Nominal interest is paid on the balance in the account. The depositor has the freedom to withdraw the amount deposited as and when he/she desires, however there are restrictions on the number of withdrawals over a period of time.
The interest on such deposits is calculated on daily product basis. The present rate of interest on Savings deposit is 4 percet per annum.Banks are now free to quote their own rate as RBI has deregulated interest on Saving deposits.
The relationship between the bank and the depositor is essentially that of "debtor and creditor" respectively.
Nomination facility is also available in such accounts.
Current Account:
Current account is generally opened for 'Trading' and 'Business' purposes. Current account is a form of demand deposit where withdrawals are allowed any number of times depending upon the balance in the account or up to a particular agreed amount.
This type of account, can be opened in a bank by any individual, business enterprise, company, government/semi-government organisation, etc. whose transactions happen to be numerous.
RBI directives prohibit payment of interest on current accounts. Banks do not pay any interest but levy some incidental charges depending upon the number of transactions.
Overdue Deposits:- Are those deposits which are not withdrawn on maturity dates. It is treated as a demand deposit
Dormant Account: - These are non- operative accounts. The accounts where no transactions has taken place during the consecutive four half years are termed as ‘Dormant’ account. Banks permit operations only after obtaining request letter from the depositor and ascertaining the reasons for not operating the account.
Opening of Account:
Application:
Application to open an account is made in Bank's prescribed account opening form. It is filled up personally, and signed in the presence of Bank’s authorized officer. In the account opening form/card the applicant must state his/her name, fathers/husbands name, full address, occupation, telephone number; PAN; date of birth in case of accounts of minors etc
Accounts can be opened singly or jointly in the names of two or more persons and may be made payable to:
Self in case of account opened singly.
In case of account opened jointly.
Any one or more of them,
Any one or more of the survivors,
Either or anyone or more of them or the survivors jointly, or survivor.
'Former or survivor 'or' latter or survivor', subject to the condition that the second/first named account holder respectively, will be entitled to the balance lying in the account only on the death of the former/latter account holder.
Who Can Open an Account?
Any person who is legally capable of entering into a valid contract can open an account. As the relationship between the bank and the depositor is that of “Debtor” and “Creditor”, the parties to the contract should be competent to enter into the contract.
According to Section 2 of the Indian Contract Act, 1872, every person is competent to enter in to contract if he /she -
(i) Is of the age of majority.
(ii) Is of sound mind, and
(iii) Is not disqualified from contracting by any law to which he /she is subjected.
Thus, any person, who is not a minor, lunatic or an un-discharged insolvent, drunkenness etc and is competent, to contract can open an account in his/her name with bank.
Exception:
A minor who has completed the age of-10-years and is able to read and write can open savings bank account in his personal name and can also operate his account. Maximum balance in such account not to exceed Rs.1, 00,000/- at any time. There is no limit to maximum balance for accounts of minors’ above-14-years.
A savings bank account can be opened in the name of minor jointly with his/her natural guardian i.e. father or guardian i.e. mother or both.
Introduction: -
For opening a bank account, introduction from someone known to the bank or a satisfactory reference is required so as to establish the identity and genuineness of the person/party in whose name the account is being opened. In the absence of proper introduction, the bank may not get the statutory protection under Section 131 of the Negotiable Instrument Act of 1881. Another important requirement of opening of an account is a photograph of the account holder(s).
Who can introduce?
(a) Bank officials
(b) By an existing account holder, of repute and standing whose account is satisfactorily and actively conducted.
(c) Any one of the following documents bearing photograph of the holder;
(1) Valid passport
(2) PAN Card
(3) Driving License
(4) Voters ID card
(5) Defence ID Card
(6) Identity card of employees of Central/State Govt. & Public Sector undertakings.
(7) Senior Citizen’s Card
Banks take only original valid documents for verification and verify the photo affixed on the account opening form/card and the address of the account form and the document presented for identification.
Nomination:
Banks ask their account holders to make nominations, which mean that they should nominate persons to whom the money lying in their accounts should go in the event of their death. Nomination can be made in account opening form itself or on a separate form indicating the name and address of the nominee. The account holders can change the nomination any time.
Standing Instructions:
These are the the instructions given by a customer to his banker to pay a person or an organization a certain sum of money at regular intervals by debit to his/her account. For example, customers may give standing instructions to pay insurance premium on due dates or remit a certain sum of money for credit to some other account, etc. In case a bank fails to comply with the instruction after it has been received, it will be liable for the damages.
Closing of Account:
An account holder can close the account after applying in writing to this effect to the bank. A banker is not entitled to arbitrarily close any account. However, in case of unsatisfactory transactions, the banker has right to close the customer‘s account after giving him a reasonable notice.
When an account is closed, all unused cheque forms are required to be returned to the bank.
Deposit Insurance:
Insurance of bank deposits is intended to protect the interest of depositors, on account of failure of banks. After the banking crises in Bengal in the year 1948 the concept of insuring deposits kept with banks received attention for the first time. The question came up for reconsideration in the year 1949, but it was decided to hold it in abeyance till the Reserve Bank of India ensured adequate arrangements for inspection of banks.
After the crash of the Palai Central Bank Ltd., and the Laxmi Bank Ltd. in 1960,serious thought to the concept was, given by the Reserve Bank of India and the Central Government. The Deposit Insurance Corporation (DIC) Bill was introduced in the Parliament on August 21, 1961. After it was passed by the Parliament, the Bill got the assent of the President on December 7, 1961 and the Deposit Insurance Act, 1961 came into force on January 1, 1962.
The scheme is now being administered by Deposit Insurance and Credit Guarantee Corporation of India Ltd. (DI & CGC).
The scheme of deposit insurance infuses protection and confidence in the depositors.
Deposit Insurance and Credit Gurantee Corporation (DI & CGS):
The Government of India introduced the scheme on 1st April 1981 in lieu of the earlier Credit Guarantee Scheme, which came into force on January 1, 1962
The scheme provides a measure of protection to eligible credit institutions against possible losses in respect of their advances to small scale industries and loans to other small borrowers like artisans, self employed persons, satisfying RBI criterion. It also provides insurance to banks giving protection to small depositors. The eligible credit institutions include — Commercial Banks, Regional Rural Banks, Co-operative Banks, State Financial Corporations and certain State Industrial Development Corporations, etc.
The DICGC insures all deposits such as savings, fixed, current, recurring, etc deposits except the following types of deposits.
(i) Deposits of foreign Governments;(ii) Deposits of Central/State Governments;(iii) Inter-bank deposits;(iv) Deposits of the State Land Development Banks with the State co-operative bank;(v) Any amount due on account of and deposit received outside India(vi) Any amount, which has been specifically exempted by the corporation with the previous approval of Reserve Bank of India
Each depositor in a bank is insured up to a maximum of Rs.1, 00,000 (Rupees One Lakh) for both principal and interest amount held by him in the same right and same capacity as on the date of liquidation/cancellation of bank's Licence or the date on which the scheme of amalgamation/merger/reconstruction/reconstruction comes into force
The DICGC is liable to pay to each depositor through the liquidator, the amount of his deposit up to Rupees one lakh within two months from the date of receipt of claim list from the liquidator.
If a bank is reconstructed or amalgamated / merged with another bank, the DICGC pays the bank concerned, the difference between the full amount of deposit or the limit of insurance cover in force at the time, whichever is less and the amount received by him under the reconstruction / amalgamation scheme within two months from the date of receipt of claim list from the transferee bank / Chief Executive Officer of the insured bank/transferee bank as the case may be.
1 comment:
sir,thank you so much for sharing this valuable information about banking as well as HRM and marketing.
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