Demand Deposit – Overview, Types, and Importance

▪️DEMAND DEPOSITS

1. Savings Accounts
➢ A savings account allows you to accumulate interest on funds you’ve saved for future needs. Interest rates can be compounded on a daily basis.
➢ Savings accounts vary by monthly service fees, interest rates, method used to calculate interest, and minimum opening deposit.
➢ In these type of accounts, we have salary or student account etc.

2. Current Accounts

➢Current Accounts are basically meant for businessmen and are never used for investment or savings.
➢ These deposits are the most liquid deposits and there are no limits for number of transactions or the amount of transactions in a day.
➢ Most of the current account are opened in the names of firm / company accounts.
➢ No interest paid by banks on these accounts. On the other hand, banks charges certain service charges, on such accounts.
➢ In this type of account do not contain any fixed maturity as these are on continuous basis accounts. Overdraft facility is available in this account.

3. No Frill Accounts:

➢Banks were advised in November 2005 to make available a basic banking ‘no-frills’ account either with ‘nil’ or very low minimum balance as well as charges that would make such accounts accessible to vast sections of population.

➢ No frill account is a type of bank account, with low / Zero balance requirement with extra-features removed.

➢ RBI came up with this No-frill concept, because poor people cannot open regular bank accounting having requirements like Rs.5000/- minimum balance etc.

3.Basic Savings Bank Deposit Account (BSBDA) :

➢According to the RBI guidelines August 2012, Basic Savings Bank Deposit (BSBD) account has been created under the Financial Inclusion, which has a zero minimum balance requirement, can be opened by people who do not want to be bothered with maintaining any minimum balance.

➢ A BSBD account does not require customers to maintain any monthly average balance. KYC Norms is applicable to these accounts.

➢ Since BSBD is a type of savings account, the eligibility of a customer to open this account and interest rates offered by it are the same as savings bank accounts.

➢The customer cannot have any other savings bank account, if he/she has a basic savings bank deposit account in a bank. An individual is eligible to have only one ‘Basic Savings Bank Deposit Account’ in one bank.

➢While there will be no limit on the number of deposits that can be made in a month, account holders will be allowed a maximum of four withdrawals in a month, including ATM withdrawals.

4. Current Account Savings Account (CASA) :
➢CASA deposit is the amount of money that gets deposited in the current and savings accounts of bank customers. It is the cheapest and major source of funds for banks. The savings accounts portion pays more interest compared to current accounts.
➢ A CASA operates like a normal bank account in which funds may be utilized at any time. Because of this flexibility, a CASA has a lower interest rate than a term deposit because the bank does not have a guarantee that all the funds are available to lend for a specific period of time.
➢The CASA ratio shows how much deposit in a bank has in the form of current and saving account deposits in the total deposit.

Basic Banking Awareness 100 MCQs

What is meant by demand deposit?

A demand deposit account (DDA) consists of funds held in a bank account from which deposited funds can be withdrawn at any time, such as checking accounts. DDA accounts can pay interest on a deposit into the accounts but aren’t required. A DDA allows funds to be accessed anytime, while a term deposit account restricts access for a predetermined time.