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Question
Explain the following term/concept:
Time Deposits.
Solution
1) Any deposit which is not repayable on demand is called time deposit. Time deposits are repayable after a specified period of time. Time deposits may be classified as fixed deposit and recurring deposit. Under Fixed deposit account certain amount is deposited for fixed period (minimum 45 days or more). Usually a higher rate of interest is paid depending on the period. Interest is paid either at a regular time interval or on the maturity of deposits. Fixed Deposit Receipt (FDR) is issued to the depositor. Loan is given to depositor on the security of FDR.
2) Under Recurring deposit account, depositor is required to deposit with the bank a fixed sum of money every month for 12, 24, or 60 months. To encourage saving habit among the people bank allows depositors to open this account. 0n maturity, the depositor gets the total amount deposited plus interest accrued on it. Passbook is issued to the depositor. E-statement is issued to the depositor only on demand.
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