Types of Deposits

Types of Deposits- Deposits from the public are the principal sources of funds for banks. In India, deposits are classified into three categories:

• Fixed Deposit Account: These are made for a wide range of 15 days to 3 years and more for a set percentage of interest. The depositor cannot withdraw the deposit before the expiry of the agreed period and the payment is made once at the time of opening of the account. The deposit rate depends on the length of the period, the amount deposited, the credit of the bank, and the condition of the money market. A ‘fixed deposit receipt’ (FDR) is exempt from the payment of stamp duty.

• Current Account: It is defined as a running, active account on which cheques are drawn and to which credits are paid. There are no restrictions on the number of deposits and withdrawals made to/from a current account. Bankers do not allow interest on the balances of such amounts (if so, it is negligible). A minimum balance is required on the account else there are incidental charges levied.

• Savings Deposit Account: A person may deposit money as often as needed provided that he/she abides by the prescribed yearly limit. No overdraft is granted on savings accounts, but many ancillary services can be availed of such as free mail transfer, collection of cheques, dividend warrant, etc., and payment of insurance premiums.

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