The main sources of funds for banks is deposits from the customers. Banks lend the money accepted from the public to the people who need by charging interest. Before knowing about the deposit accounts offered by banks, we have to know about different types of deposits, they are as follows:
Demand Deposits are deposits which come with an obligtion to pay whenever demanded by depositor. These are the deposits payable on demand and they have no fixed term to maturity.
Time Deposits are the deposits which are not payable on demand and have a fixed term to maturity.
Based on these two types of deposits, the deposit account are classified into three different types, they are as follows:
1. Current Account
2. Savings Bank Account
3. Term Deposits Account.
Current Account deposits fall entirely under the demand-deposit category and the deposits in the current account are payable on demand and they don’t have maturity time period. These current accounts are used by the business people because current accounts don’t have withdrawl limits and very minimal restrictions on ATM withdrawals.
Savings Account is the account which falls under both demand-deposit and time-deposit categories. Savings Account deposits are subjected to many restrictions relating to withdrawals. The amount in the savings account get interested from the bank. Savings Bank Accounts are mainly targeted for a large segment of small depositors.
CURRENT ACCOUNTSAVINGS ACCOUNTCurrent Account is the form of demand-deposits and the banker is obliged to repay the amount in the account on demand from the customer.Saving Account is the form of both demand deposit and time deposit, because the amount is payable on demand and also banker pays interest on the amount in the account. USED BYCurrent Accounts are opened by rich individuals, business firms, trust societies, etc.Savings Accounts are used by a small depositors i.e. individuals who have normal income and don’t do any high transactions. INTERESTCurrent Account deposits are non-interest bearing i.e the banker do not pay any interest for the amount in account.Savings Account deposits earn interest as per the RBI rules on the balance left in the account of a customer. COSTThe cost of maintenance of a current account is high for banks and they insist customers on maintaining minimum balances to cover up the costs.The cost of maintenance of a savings account is low compared to current account because there are no high transactions involved. RESTRICTIONSThere are very less or no restrictions on the withdrawal limits of current account.There are many restrictions on the withdrawal policy of a savings account. OBJECTIVEThe primary objective of a current account is to provide convenient and more liquidity facilities to the customer.The primary objective of a savings account is to encourage savings in the public by providing convenience and at the same time offering interest on deposits.
The top management of a bank takes decisions and formulates policies relating to types of deposits, interest rates, transaction charges, schemes to be introduced, etc. depending on the changing economic and technological environment.