Deposits
- A bank and financial institution offers to their customers various schemes to safeguard their money, and those customers choose various schemes as per their preference and requirement.
Types of deposits
Current Account:
- It is type of account in where a customer can deposit and withdraw amount several times a day as per their requirement and obligation.
- There is no limit to withdraw and deposit in this account.
- Usually customers for this account are businessmen who conduct several financial transactions in day
Saving Account:
- A bank offers this type of account to that customer who wants to deposit their partial hard earned income as a saving in a bank for their future needs and uses.
- Even though there in no limits to deposit in this account, but one cannot withdraw money as much times as s/he wants.
- Unlike current account, saving account bears interest rate in deposited money.
Fixed Account:
- Suitable for those customers who wants to keep safe and enjoy high interest on deposited money for certain period of time.
- A customer cannot withdraw amount from this account before certain period of time.
- As evidence for deposited amount, a ban provides a bill to customer. Which s/he can pledge in any B&FIs and can take loan.
Reasons why interest rate differ in those accounts
In current account, customers withdraw money whenever they are required to do so. Due to this reason, bank has to maintain a vast amount of liquidity. Hence, a bank offers no interest rate on such account.
In case of saving account, customers cannot withdraw money whenever they are required; a bank has set a limit to withdraw money therefore a bank does not need to maintain as much liquidity as for current account and bank offers interest in such account.
In fixed account, as compared to saving account, a bank offers high interest rate on deposited amount. Because as per previous agreement, a customer cannot withdraw money until the time limit for such account is crossed. It has high interest as compared to above mentioned both account because a bank does not need to maintain as much liquidity as compared to both account. In case of emergency, a customer can withdraw but need to pay fine for that.
A bank offer several saving accounts to fulfill the needs of its various customers. With differences in accounts, maturity period, time duration, and risk factors also differ accordingly. This is why interest rate on deposited amount is different as they required different level of liquidity to maintain.