Banks attract money from the public by accepting deposits in the following accounts: 1. Current Account 2. Savings Bank Deposit Account 3. Fixed or Time Deposit Account.
Type # 1. Current Account:
It is also called ‘Open Account’ or ‘Demand Deposit Account’. A businessman can open a current account with the bank. Customers can deposit money into or withdraw money from a current account whenever they like. So this account may be defined as running account between a banker and a customer. Current account generally do not carry any interest as the amount deposited in these accounts is repayable on demand.
The Reserve Bank of India prohibits the payment of interest on current accounts on deposits upto 14 days or deposits subject to withdrawal by notice of 14 days or less except with the prior approval of the Reserve Bank of India.
Only a nominal interest may be allowed on this account. Most of the banks charge incidental charges (bank charges) on such accounts. Current accounts suit the requirements of businessmen, institutions, companies, etc.
The person desiring to open a current account has to apply to the bank in the prescribed form. The application form is available in the bank free of cost.
This application form contains the information regarding the:
(i) Name of the applicant,
(ii) His full address,
(iii) His occupation,
(iv) His specimen signature,
(v) References, etc.
When the bank is satisfied with the introductory references, it proceeds with the opening of the account.
If a company wants to open a current account with the bank, the following documents are to be submitted by the company:
(i) A copy of the Memorandum of Association;
(ii) A copy of the Articles of Association;
(iii) A copy of balance sheet and Auditor’s Report of previous year;
(iv) Specimen signatures of persons authorised to withdraw the money from the bank through cheques.
After the above formalities are completed the applicant deposits the initial amount in the bank and the account is opened in the name of the applicant. The initial amount be deposited is Rs. 5 in case of savings account, Rs. 100 in savings accounts with cheque facility and Rs. 500 when current account is opened.
When an account is opened bank provides the applicant with:
(a) Pass Book,
(b) Cheque Book, and
(c) Pay-in-Slip Book.
(a) Pass Book:
It is a book issued by the bank to the customers in which all the transactions are recorded. This book contains the details of amount deposited in account, amount withdrawn from the account and the balance of the account at a particular date.
(b) Cheque Book:
Cheque book is also issued to the customer by the bank. A cheque Book generally contains from 10 to 100 such forms. When a customer wants to withdraw money from the bank, he has to fill the cheque and sign it.
(c) Pay-In-Slip Book:
It is a book containing a number of printed slips with perforated counterfoils. The slip is to be filled in by the depositor at the time of depositing cash or cheques in the bank. After filling this slip, it is presented at the counter. The counter clerk checks it, stamps and signs. The counterfoil is then returned to the depositor which is the proof of the deposit.
Type # 2. Savings Bank Deposit Account:
In savings bank deposit account small savings are deposited into bank by the customers to safeguard their future and to earn some interest on their saving. This account can be opened by any person with a minimum amount of Rs. 5. In this account, deposits can be made for any number of times in a week but can be withdrawn once or twice a week.
The rate of interest at present is 5% per annum. Interest is allowed on the minimum balance standing to the credit of an account during the period from the 10th day of the month to the last day of every month. The bank issues a pass book to the saving bank account holder.
The depositor is required to present this pass book along with a withdrawal form whenever he wants to withdraw money. Banks also provide cheque facility to the depositors who maintain a minimum balance of Rs. 100 in their account.
Type # 3. Fixed or Time Deposit Account:
In fixed deposit account the money is deposited for a fixed period and cannot be withdrawn before the expiry of that specified period. This period usually varies from 3 months to 5 years or more. The rate of interest on such accounts depends upon the length of the time of deposit. This is also known as Time Deposit.
Fixed deposits are the most suitable form of accepting deposits for a commercial bank. Since they are repayable after a specified period, if a customer needs money before the expiry of the specified period, he can take a loan against the fixed deposit. This account can be opened with the bank by filling a prescribed form available in the bank free of cost.
This form contains the particulars as:
(i) Name of the depositor,
(ii) Amount,
(iii) The period,
(iv) Specimen signatures, etc.
At the expiry of specified period, the deposit holder will be entitled to claim the deposited money along with interest on presenting the receipt of deposit.