Deposit Management

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  • Topic: Deposit account, Cheque, Bank
  • Pages : 21 (4315 words )
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  • Published : October 21, 2008
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MANAGEMENT OF DEPOSITS
IN COMMERCIAL BANKS

Before going in to details of Deposit management
One must under stand the format of balance sheet

THIRD SCHEDULE TO BANKING REGULATIONS ACT 1949

FORM A
FORM OF BALANCE SHEET

SCHEDULEAS ON 31/3/----
(Current year)AS ON 31/3/----
(Previous Year)
CAPITAL & LIABILITIES
Capital
Reserves & Surplus
Deposits
Borrowings
Other Liabilites & Provisions

1
2
3
4
5
Total
ASSETS

Cash & Balances with RBI
Balances with banks and money at call and short notice
Investments
Advances
Fixed Assets
Other Assets

6
7

8
9
10
11

Total
Contingent Liabilities,Bills for collections

Introduction

Deposits represent the most important source of funds for a bank.

Deposits are received from a large number of constituents, generally in small amounts.

Balance Sheet Disclosure

Deposits are required to be classified in the balance sheet under the following heads.

A. I. Demand Deposits

(i) From Banks
(ii) From Others

II Savings Bank Deposits

III. Term Deposits
(i) From Banks
(ii) From Others

B. I. Deposits of branches in India

II. Deposits of branches outside India

STRUCTURE OF DISCUSSIONS

1.Objectives

1.2 Importance of Deposits

1.2.1. For a bank

1.2.2. For depositors

1.2.3. For the economy

1.3. Types of Deposits

1.3.1.Demand Deposits

Current Accounts

Savings Bank Accounts

Deposit at Call accounts

1.3.2. Term Deposits

Fixed Deposits

Recurring Deposits

1.3.3. Hybrid deposits or Flexi-Deposits

1.4. Operations in deposit accounts

1.5. Closing a deposit accounts

1.6. Let us sum up

1.1OBJECTIVES:

Acceptance of money deposit (or deposit-taking) is a major function and a distinct feature of commercial banking.

This discussion will enable one:

to appreciate the importance of deposits for the bank, its customers and the economy .

to understand the various categories of deposits, types of deposit accounts and their main features,

To understand the common principles and precautions involved in opening, closing and operating the deposit accounts

1.2. IMPORTANCE OF DEPOSITS

1.2.1. For a bank

Deposit taking means accepting money (notes/ coins) or its equivalents (like cheques, banker's drafts) for keeping in deposit accounts.

It is the most important function of a commercial bank since it enables a bank to accumulate funds required for its other major function viz. lending to industry, trade and commerce.

Deposits constitute the bulk of a bank's total liabilities; the remainder portion of the liabilities being Owned Funds (capital and reserves), borrowings and provisions.

Thus, deposits represents the main source of funds for a bank's operations and determine the size of its balance sheet as well as its strength and market share.

The quantum of deposits of a bank and its market share in deposit business depend on a mix of factors, as follows:

the financial soundness of the bank that instills confidence in the public, to entrust their deposits with the bank, assured of its safety;

the number of branches and other banking channels that offer deposit facilities/ service to customers;

the range of deposit and other products available;

the efficiency in product-delivery

the quality of customer service and'

Interest rates offered on deposits as compared to its competitors/ other banks.

Deposit-taking and allowing its withdrawal by cheque or otherwise are the essential and unique features of a bank.

A non-banking finance company, insurance company or mutual fund cannot issue cheque book of its own to the depositors for withdrawing funds from time to time; such institutions can only repay the customers' deposits (term deposits) after their maturity. Similarly,...
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