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One of the key activities performed by banks is accepting deposit from public. Important features of bank deposit are
♦Bank deposits are safe as-
– Banks are under control of RBI
– Bank deposits are covered under DICGC
♦ Highly liquid-even fixed deposits can be taken back on demand.
♦Loans can be raised against bank deposits
♦Interest rate differ from deposits to deposit
♦ Interest rate are subject to regulation by RBI
Deposit accounts with bank can be opened by different categories of customers such as-
♦Individual account
♦Joint account
♦Partnership account
♦Sole proprietor
♦Company
♦Govt./Corporate/Society/Trusts/Trade Unions Deposit schemes can be broadly classified as-
I. Deposit accounts of Indian residents which include.
– Saving deposits to motivate and attract savings from public.
– Current amount which generally opened by businessman and banks do not allow any interest on this deposit.
– Fixed Deposit- Deposit for a fixed period. Interest depends upon period.
– Recurring Deposit- Depositing small amount every month maturing after fixed period say 5 years.
– Special deposit schemes of banks
– For senior citizens
– For specified period say 555 days, 333 days, 444 days
– Tax saving schemes e.g. fixed deposits for 5 years
II. Bank Deposits for Non-Resident-Indians (NRI‟s)
(i) Non Resident Ordinary (NRO – Account to be open by NRI taking employment in a foreign country. Amount credited is not repatriable and subject to tax deduction at source and covered under General/special regulation by RBI.
(ii) Non-Resident External (NRE)- Accounts for person employed in foreign countries in firms owned by NRI‟s at least 60%. Deposits are accepted in foreign currency and freely repatriable, interest is exempted from tax.
(iii) Foreign Currency Non-Resident (FCNR) – Accounts such account are like NRE account but they are maintained in designated foreign currency at approved dealer. These currencies are US Dollar, Pond Sterling, Euro and Japanese Yen. Accounts are in the form of term deposits only.
(iv) Resident Foreign Currency (RFC) Account- Can be opened by a NRI who was in a foreign country for at least a year. Account may be in the form of current, saving, term deposit. No loan against & deposit balance outstanding can be transferred to NRE/FCNR accounts.
(v) Escrow Account- Account opened with the approval of RBI for adjustment of value of goods imported or exported. Account is opened in US Dollar in the name of overseas organization, no overdraft or loan is permitted.
(vi) Other accounts such as-
a. Foreign currency accounts of Airline Shipping companies.
b. Foreign currency accounts of overseas buyers.
c. Foreign currency accounts of foreign Embassies/Missions/Diplomats.
III. Deposits order National Saving Schemes-
After passing Government Savings Banks Act 1973, Post Office saving bank of India came in to existence. Governments saving banks were merged with Post Office Saving Bank (POSB). Different deposit schemes are-
♦ National Small Saving Fund- All deposits are credited to NSSF- withdrawals are permitted-amount in credit is invested in government securities.
♦ National Saving Certificates (NSC‟s) – Certificates are issued by post offices maturing after 5 years with tax benefit. Loan can be taken from banks against pledging these NSC‟s
♦ Post Office Monthly Income Account- Can be opened with a minimum of Rs.1000 and maximum of Rs. 3 lakh for single and 6 lakhs for Joint Account. Depositor gets monthly interest.
♦ Public Provident Fund Account- Another saving plan with minimum of Rs.500 and maximum of Rs. 70,000 per month. Deposits qualify for deduction of income tax under section 80-C of Income Tax Act.
