‘Banking Awareness’ is the series which is updated daily, and is intended to help you with your preparation for various bank exams. The following article is about ‘Banking Products in India – Deposits’.
How do banks support the common man, industries, and the Indian economy? It offers various products and services to ensure that the money deposited by customers is safe, loan seekers get loans, and money is invested in viable projects.
Banking Awareness: Products to Initiate Deposits
Banks initially started with various deposit banking products, such as Term Deposit Accounts, Current Deposit Accounts, and Savings Deposit Accounts. Today, there are many products as safe deposit is not the only criterion for keeping money in a bank. The banks offer interests against the deposits. So, account holders earn as well.
Some years back, the interest rates were decided by the RBI. Banks needed to only execute RBI policies and terms. However, since 2011 the RBI has de-regularized interest rates. So now, banks can decide the rate of interest for various deposits (provided they follow some guidelines from the RBI). This also shows that banks can compete with one another by deciding on lucrative products and services to their customers.
Banking Awareness: Here are some popular banking products to deposit money
1. Savings Deposit: This type of deposit is the most popular one where individuals as well as institutions deposit money for safe-keeping of funds, withdrawals of funds to meet day-to-day or miscellaneous expenses, and earning through short-term deposit schemes. It has been growing by at least 19 percent each year. Today, the banks have diversified the savings deposit (SD) banking product. The idea is to make it more convenient to the customers, say working members, retired people, kids, or institutes. For instance:
- SD accounts for retired people: The accounts have monthly withdrawal schemes. They cater to people who are retired and don’t have a regular income, except pension perhaps or income from their savings. The interest rates of various schemes for the retired, if applied, will be deposited conveniently in the account.
- SD accounts for kids or minors: These are accounts just for the minors or kids who are below 18 years and over 10 years. The accounts can be a joint account with the minor and one of the guardians or it may be a single account of the minor. So, why keep pocket money at home? The SD for kids is just like a piggy bank which ensures money in small amounts get deposited from time to time and the minor starts earning interests as well.
- Premium SD accounts: These are savings accounts with special privileges. The banks provide round-the-clock withdrawals of any amount, banking facilities at any location or country, currency transaction anytime, and more to the customers with this account. In exchange of this premium services, the customers must deposit at least One Lakh Rupees or more.
- Corporate SD account: Free demat account, free expert advice on funds, limitless cash deposits, out-station cheque collection, and corporate net banking, are some of the features for this type of savings account.
2. Term Deposit: Banks allow customers to deposit a sum of money for a longer duration, say 7 or 10 years. These are known as Fixed Deposits or Term Bonds where the bank takes the money and provides it back with interest after the tenure is over. Although premature withdrawal of the term deposits is also possible, however the depositor will not get the same amount of interest. Sometimes 1 percent penalty is levied.
3. Recurrent Deposit: Quite similar to the term deposit is the recurrent deposit where sum amount of money is deposit for certain duration. Unlike term deposits where a lump sum of the deposit is given at one time, recurrent deposit allows the depositor to deposit a small amount of money each month. Today, many banks offer variable recurrent deposits where more or less amount than the decided amount can be deposited – apart from the usual fixed recurrent deposit.
4. Current Deposit: In this account, account holders can deposit or withdraw any amount of money. The amount is mostly for further investments or savings, the account is meant to store ‘liquid money’ or funds that can be used immediately. In these accounts, unlimited amount of transactions can be done – either withdrawal or deposit.
5. Demat Account: Often, shares and debentures are kept in demat or ‘Dematerialized’ accounts. Banks sometimes create these accounts. It is now essential to have this account to buy or sell shares and stocks.
These accounts are banking products on deposits made by the bank account holders or customers. The bank further invests these deposits by providing loans and other banking products. Check them out in the next article.