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Question
How do commercial banks mobilise deposits from the public?
Solution
A commercial bank mobilises deposits from the public by accepting the following deposits:
i. Fixed deposits are accepted for a specific period of time which carries interest at relatively high rates. According to the maturity period, the rate of interest varies. If the deposited money is withdrawn before the expiry of the specified period, the interest will not be paid.
ii. Demand deposits are those deposits which can be withdrawn at any time by the depositors by cheque. It has no interest rate.
iii. Savings deposits are those deposits on the withdrawal of which a bank places certain restrictions. Cheque facility is provided to the depositors. It is generally held by households who have an idle cash for a short period.
iv. Recurring deposits are those deposits under which the account money is deposited in monthly instalments for a fixed period of time. It carries a high rate of interest.
