What Are the Types of Bank Deposits & Key Features?

Bank deposit refers to the placement of one’s income into a safeguard. The account holder hereby has the right to withdraw the deposited money within the term and conditions of the selected scheme. Banks are therefore considered as the custodians of public money which helps to mobilize the deposit from the public. Mainly there are two types of deposits viz. Time deposits and Demand deposits.

Types of Deposits in India

• Time Deposit or Term Deposit (TD)
  1. Fixed Deposit (FD)
  2. Recurring Deposit (RD)
  3. Reinvested Deposit
• Demand Deposit
  1. Current Deposit (CD)
  2. Saving Deposit Account
• CASA Deposits
• NRO, NE(E)RA and FCNA(A) Account
  1. Non Resident Ordinary Accounts (NRO)
  2. Non-Resident (External) Rupee Account (NE(E)RA)
  3. Foreign Currency Non-Resident Accounts (FCNR)

Term Deposits (Time Deposits)

Time deposits refer to those deposits where the money is deposited within a fixed tenor and cannot be withdrawn before the maturity time. Alternatively known as term deposits, all-time deposits are eligible for interest payment.

A widely used time deposit or term deposit is ‘Fixed deposit’, where the interest rate is dependent upon the tenor and amount of deposits. The interest rate is generally higher for time deposits with long tenor. Considering its nature, there are 3 types of Bank deposits under times deposits as follows:

Fixed Deposits(FD)

• In these Bank deposits, the bank accepts deposits ranging from 7 days to 10 years maximum. 
• A Fixed rate of interest is paid at regular intervals until fixed terms of maturity.
• The Rate of interest on Fixed Deposits (FD) depends upon the periods of deposits.
• The longer the tenor of the deposit is, the highest rate of interest is offered. 
• The pre-withdrawal facility is available with pre-determined penalties. 
• NBFCs like Bajaj Finance offer a higher rate of interest than banks. You can also avail additional benefits if you are availing a Fixed Deposit for senior citizen

Recurring Deposits(RD) 

• In recurring deposits, a customer has to deposit a fixed amount with decided installments at regular time intervals
• Each installment may vary from Rs. 5/- to Rs. 500/- or more per month. 
• The repayment of the principal amount and accumulated interest is made at the end of the term.
• Salaried or regular income generating persons is the main target of this kind of deposits.
• A recurring deposit can usually be opened for any period of time from 6 months to 120 months. 

Reinvestment Deposits 

• Interest is compounded quarterly and paid at maturity along with the principal amount.
• In the Flexi deposit amount, any excess amount beyond the fixed range in a saving account is automatically converted into term deposits. 

Demand Deposits 

When the amount deposited can be withdrawn by the customers/depositors without any prior notice to the bank, it is called demand deposits. Therefore, the account holder can easily withdraw the funds from these accounts anytime by issuing a cheque, using ATM or withdrawal form from the bank branches.

The money as demand deposits is considered as the liquid money and therefore can be encashed anytime from anywhere. Apart from this such deposits can be transferred from one person to another via cheques or electronic transfers. There are two types of demand deposits exist which are as follows:

Current Deposits

• Being demand deposits, the bank is obliged to give the money on-demand to the current deposit holder.
• The current account isn’t interest-driven and accounts for the smallest fraction among current, savings and term deposits. 
• People engaged in businesses are mainly opting for current accounts to smoothly do business transactions. 
• These are the most liquid deposits, which don’t restrict in limited transactions.
• The cost to maintain a current account is high and the bank demand customers to keep a minimal amount of balance to run the account. 

Savings Deposits

• Savings accounts are subjected to restrict transactions on a fixed time range.
• It also restricts withdrawal amount and time in a fixed tenor.
• Minimal balances have to be kept to offset the cost of maintaining and servicing such deposits.
• These kinds of deposits accumulate interest at a fixed rate set by commercial banks. 

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CASA Deposits 

CASA deposits refer to Current Account Saving Account deposits which are considered as the low-interest type of deposits for the banks compared to other deposits. To increase the CASA deposits, banks tend to offer various services such as salary accounts to the companies.

They also encourage merchants to open current accounts and use their cash-management facilities. The banks in the high CASA ratio are in a better position than that of low CASA ration one. CASA ratio determines the stability of a financial institute in terms of fund generation. 

NRO, NE(E)RA and FCNA(A) Account

There are several types of deposit accounts facilitated to the non-resident Indians, persons of Indian origin, and overseas citizens of India. They are as follows:

Non Resident Ordinary Accounts (NRO)

• Any person resident out of India can open an account under this scheme.
• Usually, when a resident becomes non-resident, his/her account gets converted into NRO.
• It provides the NRI’s with the credits accumulated from rent or interest of any savings or investments. 

Non-Resident (External) Rupee Account (NE(E)RA)

• It’s a rupee account where the NRI can remit money to India from their funds abroad
• It exposes the depositors to the currency rate risk

Foreign Currency Non-Resident Accounts (FCNR)

• It replaced the existing FCNR(A) scheme with the opening of NRI’s in 6 designated currencies as follows: 

1. 1. US Dollars (USD)
   2. Great Britain Pound (GBP) 
   3. Euro (EUR)
   4. Japanese Yen (JPY)
   5. Canadian Dollar (CAD)
   6. Australian Dollar (AUD)

• FCNR deposit is a deposit i.e only opened in the form of term deposits and not in the form of demand deposits.
• Interest is paid on maturity in the same currency of the deposits.

There are various types of Bank deposit Accounts describes above but when it comes to choosing a Safe & high return investment option, Fixed Deposits turn out to be a great option for youth and senior citizens alike.

With various options and features that are now offered by NBFCs like Bajaj Finance when it comes to Fixed Deposits, investing in them has become more profitable and easier.

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