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Question
Explain the various types of deposits.
Solution
There are two types of deposits.
1) Demand Deposits
i. Current account deposits
ii. Saving accounts deposits
2) Time Deposits
i. Recurring deposits
ii. Fixed deposits
1) Demand deposits: These are the deposits which can be withdrawn as and when demanded i.e. the withdrawal is not time-bound. Demand deposits are of following types.
a. Saving account deposits: A savings account caters to the needs of those individuals who wish to save a part of their income and earn interest on the amount saved. Such deposits are payable on demand i.e. such deposits can be withdrawn by the depositor subject to some limitations.
b. Current account deposits: Current account deposits refer to those deposits that provide the deposit or the liberty to withdraw money at any point in time. Generally, current account deposits prove useful for businessmen as they are required to deal with many transactions in a single day. Such deposits do not offer any rates of interest.
2) Time deposits: These are the deposits which can be withdrawn only after a certain period of time. Unlike demand deposits, they are not payable as and when demanded. These are of two types
a. Recurring deposits: Under this account, the customer deposits a fixed amount periodically up to a certain period. The amount keeps on getting accumulated. An interest is provided on these deposits and the amount can be withdrawn only after the end of a particular period of time.
b. Fixed deposits: Fixed account deposits refer to those deposits that are held for a fixed (specific) period of time (called the maturity period). These deposits cannot be withdrawn before the maturity period. Hence, they are not payable on demand. Also, these deposits are non-cheque able deposits. However, due to the longer lock-in period involved in the fixed account deposits, these deposits involve a higher rate of interest than that earned on the savings account deposits.
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