DEFINITON

Deposit account is a savings account, current account or any other type of bank account that allows money to be deposited and withdrawn by the account holder. These transactions are recorded on the bank's books, and the resulting balance is recorded as a liability for the bank and represents the amount owed by the bank to the customer. Some banks may charge a fee for this service, while others may pay the customer interest on the funds deposited.

The main banking activities consist of acceptance of deposit from the public for the purpose of lending to businessmen and others who may seek loans. Actually the money deposited in any bank is mostly the saving of the people. As you know, if someone earns money and has regular income, he or she not only spends it for day-to-day expenses but also tries to save a part of the income for future needs. Money may be needed in future for various purposes like medical treatment in case of illness in the family, expenses on account of marriage, or for higher studies of the children, or to celebrate religious festivals, etc. The money saved to meet future needs may be kept at home. But will it be safe at home? It may be stolen. Moreover, the money saved will remain idle at home without any return. So people keep their savings with someone where it will be safe and earn a return. Bank is such a place where money once deposited remains safe and also earns interest. In this lesson, we shall learn about the types of deposit accounts that can be opened in a bank, and also discuss how a savings bank account can be opened and operated.

Major types

Transactional account

Current account (Commonwealth)/Checking account (US)

A deposit account held at a bank or other financial institution, for the purpose of securely and quickly providing frequent access to funds on demand, through a variety of different channels. Because money is available on demand these accounts are also referred to as demand accounts or demand deposit accounts, except in the case of NOW Accounts.

TYPES OF BANK ACCOUNTS IN INDIA (Deposit Accounts)

CURRENT DEPOSITS / ACCOUNTS

SAVING BANK / Saving Fund DEPOSITS / ACCOUNTS

RECURRING DEPOSITS / ACCOUNTS

FIXED DEPOSITS / ACCOUNTS OR TERM DEPOSITS

Traditionally banks in India have four types of deposit accounts, namely Current Accounts, Saving Banking Accounts, Recurring Deposits and, Fixed Deposits. However, in recent years, due to ever increasing competition, some banks have introduced new products, which combine the features of above two or more types of deposit accounts. These are known by different names in different banks, e.g 2-in-1 deposits, Smart Deposits, Power Saving Deposits, Automatic Sweep Deposits etc. However, these have not been very popular among the public.

What is a Current Account ? Who uses current accounts? Current Accounts in Banks

Current Accounts are basically meant for businessmen and are never used for the purpose of 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. Cheque book facility is provided and the account holder can deposit all types of the cheques and drafts in their name or endorsed in their favour by third parties. No interest is paid by banks on these accounts. On the other hand, banks charges certain service charges, on such accounts.

Features of Current Accounts :

(a) The main objective of Current Account holders in opening these account is to enable them (mostly businessmen) to conduct their business transactions smoothly.

(b) There are no restrictions on the number of times deposit in cash / cheque can be made or the amount of such deposits;

(c) Usually banks do not have any interest on such current accounts. However, in recent times some banks have introduced special current accounts where interest (as per banks' own guidelines) is paid

(d) The current accounts do not have any fixed maturity as these are on continuous basis accounts

What is a Savings Bank Account ? Who uses Saving Bank Accounts ?

These deposits accounts are one of the most popular deposits for individual accounts. These accounts not only provide cheque facility but also have lot of flexibility for deposits and withdrawal of funds from the account. Most of the banks have rules for the maximum number of withdrawals in a period and the maximum amount of withdrawal, but hardly any bank enforces these. However, banks have every right to enforce such restrictions if it is felt that the account is being misused as a current account. Till 24/10/2011, the interest on Saving Bank Accounts was regulared by RBI and it was fixed at 4.00% on daily balance basis. However, wef 25th October, 2011, RBI has deregulated Saving Fund account interest rates and now banks are free to decide the same within certain conditions imposed by RBI. Under directions of RBI, now banks are also required to open no frill accounts (this term is used for accounts which do not have any minimum balance requirements). Although Public Sector Banks still pay only 4% rate of interest, some private banks like Kotak Bank and Yes Bank pay between 6% and 7% on such deposits. From the FY 2012-13, interest earned upto Rs 10,000 in a financial year on Saving Bank accounts is exempted from tax.

What are Recurring Deposit Accounts ? Who use Recurring Deposit Accounts ? or RD accounts

These are popularly known as RD accounts and are special kind of Term Deposits and are suitable for people who do not have lump sum amount of savings, but are ready to save a small amount every month. Normally, such deposits earn interest on the amount already deposited (through monthly installments) at the same rates as are applicable for Fixed Deposits / Term Deposits. These are best if you wish

to create a fund for your child's education or marriage of your daughter or buy a car without loans or save for the future.

Under these type of deposits, the person has to usually deposit a fixed amount of money every month (usually a minimum of Rs,100/- p.m.). Any default in payment within the month attracts a small penalty. However, some Banks besides offering a fixed installment RD, have also introduced a flexible / variable RD. Under these flexible RDs the person is allowed to deposit even higher amount of installments, with an upper limit fixed for the same e.g. 10 times of the minimum amount agreed upon.

These accounts can be funded by giving Standing Instructions by which bank withdraws a fixed amount on a fixed date of the month from the saving bank of the customer (as per his mandate), and the same is credited to RD account.

Recurring Deposit accounts are normally allowed for maturities ranging from 6 months to 120 months. A Pass book is usually issued wherein the person can get the entries for all the deposits made by him / her and the interest earned. Banks also indicate the maturity value of the RD assuming that the monthly instalents will be paid regularly on due dates. In case instalment is delayed, the interest payable in the account will be reduced and some nominal penalty charged for default in regular payments. Premature withdrawal of accumulated amount permitted is usually allowed (however, penalty may be imposed for early withdrawals). These accounts can be opened in single or joint names. Nomination facility is also available.

The RD interest rates paid by banks in India are usually the same as payable on Fixed Deposits, except when specific rates on FDs are paid for particular number of days e.g. 500 days, 555 days, 1111 days etc i.e. these are not ending in a quarter.

What are Fixed Deposit Accounts in India or Term Deposits

All Banks in India (including SBI, PNB, BoB, BoI, Canara Bank, ICICI Bank, Yes Bank etc.) offer fixed deposits schemes with a wide range of tenures for periods from 7 days to 10 years. These are also popularly known as FD accounts. However, in some other countries these are known as "Term Deposits" or even called "Bond". The term "fixed" in Fixed Deposits (FD) denotes the period of

maturity or tenor. Therefore, the depositors are supposed to continue such Fixed Deposits for the length of time for which the depositor decides to keep the money with the bank. However, in case of need, the depositor can ask for closing (or breaking) the fixed deposit prematurely by paying paying a penalty (usually of 1%, but some banks either charge less or no penalty). (Some banks introduced variable interest fixed deposits. The rate of interest on such deposits keeps on varying with the prevalent market rates i.e. it will go up if market interest rates goes and it will come down if the market rates fall. However, such type of fixed deposits have not been popular till date).

The rate of interest for Fixed Deposits differs from bank to bank (unlike earlier when the same were regulated by RBI and all banks used to have the same interest rate structure. The present trends indicate that private sector and foreign banks offer higher rate of interest.

The earlier trend that private sector and foreign banks offer higher rate of interest is no more valid these days. However, now a days small banks are forced to offer higher rate of interest to attract more deposits. Usually a bank FD is paid in lump sum on the date of maturity. However, most of the banks have also facility to pay/ credit interest in saving account at the end of every quarter. If one desires to get interest paid every month, then the interest paid will be at a marginal discounted rate. In the changed computerized environment, now the Interest payable on Fixed Deposit can also be easily transferred on due dates to Savings Bank or Current Account of the customer.

In today’s markets, there a myriad investment opportunities available to people in India but of them all there is one which has been a favoured instrument in the country for ages. This instrument is known as the fixed deposit or term deposit. Imagine, if you will, that you find yourself flush with a lump sum of money which you intend to save and want it to grow but don’t want it to be at risk in any way. This is where the fixed deposit comes in because you can take that money and give it to a bank for a specific period of time ranging from 7 days to 10 years. Once the money is with the bank, it starts earning an interest that is based on the duration of the deposit and can go to rates as high as 9% per annum, depending on the bank and the scheme. Once the deposits tenure is over, the bank returns the money to you along with all the interest that it has earned. Other than safe and steady growth,

the fixed deposit also offer features like extra interest rates for senior citizens, no limits on how much can be invested in the FD and even tax benefits if the investment is made in a tax saving fixed deposit; all of which make a favourite among investors in India.

Features of Fixed Deposit Account

The main purpose of fixed deposit account is to enable the individuals to earn a higher rate of interest on their surplus funds (extra money).

The amount can be deposited only once. For further such deposits, separate accounts need to be opened.

The depositor is given a fixed deposit receipt, which depositor has to produce at the time of maturity. The deposit can be renewed for a further period.

As per the Traditional scheme, the interest on the FD account is credited to the Savings account specified by the depositor on a monthly basis or on a quarterly basis. For the Reinvestment scheme, the interest is compounded to the principal amount on a quarterly basis.

Tax is deducted at source, from the interest on Fixed Deposits, as applicable, as per the Income Tax Act, 1961.

Compound Interest and Impact of Compounding frequency

OBJECTIVES OF DEPOSITS

Deposits are a crucial part of any investment and savings plan. Although during a recession deposit accounts may pay considerably less interest due to low rates, bank deposits provide savers with a measure of safety that cannot be found elsewhere. Actively managing your deposit accounts will ensure that you know how these savings instruments work, a first step toward reaching your financial goals.

Basics

The main objective of a deposit is to save money in a safe account. Savers normally use deposit accounts for the long range, although banks offer deposit products for terms as short as one week for a certain threshold of funds (normally at least $100,000). Depending on the saver's own appetite for risk, deposit accounts may be just a part of the portfolio, the bulk of the total savings plan or even the only investment made. The Federal Deposit Insurance Corporation (FDIC) reminds us that no depositor has ever lost even a penny of FDIC-insured accounts, an important consideration for conservative investors who want a safe place to put money, while earning modest interest rates.

Types

Deposits help savers reach financial goals by providing a wide variety of account types. If the objective of deposits is to provide interest accrual in a safe environment, then many options are available from which to choose. Certificates of deposit, or CDs, are one of the most popular deposit types. CDs offer a fixed rate on a sum of money in return for a fixed-term commitment from the depositor. A large draw for CDs is flexibility; CD terms range from a week to 10 years or longer, generally paying the highest rates of return for the lengthiest terms. Although CD account owners may remove the interest as it accrues, withdrawals from principal amounts can trigger penalties.

By contrast, a savings account pays interest while also allowing the owner to make a certain amount of withdrawals per month without penalty. Savings accounts have

historically paid lower interest rates than CDs, although this has changed in recent years with the popularity of money market savings accounts. Money markets pay banks higher rates of interest on the money they invest, allowing the banks to pass on the higher interest rate to deposit customers.

Function

Deposit accounts reach fulfillment of their objective by harnessing the time value of money. This means that as interest accrues it is "compounded," allowing you to earn interest on top of interest. Basically, if you have $1,000 in a savings account, and the account earns $30 in interest in a month, the next month the bank will pay you interest on $1,030 (provided you make no withdrawals).

Another key function of deposits is rate competitiveness. Because so many banks and other financial institutions offer deposit accounts, the saver is the beneficiary of a highly competitive environment. This means that, even in times of generally low interest rates, banks will always need and desire depositors, offering customers additional benefits and perks.

Strategies

Because of the sheer number of bank deposit options, savers can plan objectives based on varying term lengths and account types. For instance, a depositor can "ladder" a deposit of $9,000, breaking the sum into three $3,000 CDs, each coming due two months apart. This strategy relieves the saver from having the entire sum tied up for a longer period of time, creating flexibility.

Many depositors use savings and CDs as a supplement to monthly income (or, if you are fortunate enough to have large deposits, the entire monthly income). This interest income can be mailed to the depositor or transferred to a checking account. Just keep in mind that this strategy will reduce your long-term interest total normally accrued through compounding.

Considerations

Historically, CDs (including individual retirement account CDs) have paid the most interest, followed by savings accounts and then interest-bearing checking accounts. This order has changed significantly in recent years, as banks have found that CDs in particular provide relatively little revenue to banks. High-yield checking accounts, which pay rates comparative to savings accounts, have become increasingly popular. In summary, you should ask your banker what accounts are paying the best interest rates.

Another consideration is that deposit accounts' main objective of paying interest with safety does not guarantee high rates of return, especially compared with risk-inherent investments like stocks. During the recession that began in 2007, for instance, the government was loaning banks cheap money; this meant that banks did not require as many depositors, decreasing interest rates overall. Remember to consider safety and flexibility, along with interest rates, when planning your deposit savings goals.

THE ADVANTAGES OF DEPOSIT ACCOUNTS

Term deposit accounts are a sure way of increasing the amount of your savings. The interest rates plus the fact you can choose how long you want to lock up your money are definitely worth tying it up for a fixed period. The advantages of these types of accounts are:

High rates of interest on your money throughout the fixed term

Guaranteed returns

They are a very safe investment

You control how long your money is locked away

You really can’t go wrong if you have a sum of cash and want to invest it as you’ll know exactly what you’ll get back at the end of the fixed term and if you don’t want to put it all into just the one term you can opt for the “ladder” strategy. This means investing in several term deposits with varying maturity dates.

Laddering allows you to take advantage of fluctuating interest rates and to invest when the rates are higher and allows you access to your funds. You can then

reinvest if you wish as each fund matures. This is a very lucrative way to grow your savings.

DISADVANTAGES OF DEPOSIT ACCOUNTS

The basic downside of investing your money in a term deposit is that you cannot access it during the investment period.

In the case of an emergency you could cancel the term before the maturity date but there’s no advantage as the release fees, which vary depending on how much time the term still had to run, means that you won’t really have benefitted.

You need to be very sure that you can afford to lock up your savings. Also, the longer you lock your money away, the better it is going to perform so weigh that up against the possibility that you may need to access some or all of it before the term ends.

If in doubt, consider placing only some of your money in a term deposit and put the rest into another high interest account that allows you to access your money.

Savings account

Accounts maintained by retail banks that pay interest but can not be used directly as money (for example, by writing a cheque). Although not as convenient to use as checking accounts, these accounts let customers keep liquid assets while still earning a monetary return.

Time deposit

A money deposit at a banking institution that cannot be withdrawn for a preset fixed 'term' or period of time. When the term is over it can be withdrawn or it can be rolled over for another term. Generally speaking, the longer the term the better the yield on the money.

Call deposit

A deposit account that allows for the withdrawal of funds without penalty, generally without notification to the bank. Often it bears a favourable interest rate, but also requires a minimum balance to take advantage of the benefits

Legal framework

Subject to restrictions imposed by the terms and conditions of the account, the account holder (customer) retains the right to have their money repaid on demand. The customer may or may not be able to pay money into or out of the account by cheque, internet banking, EFTPOS or other channels, depending on those terms and conditions.

The banking terms "deposit" and "withdrawal" mean a customer paying money into, and taking money out of, the account. From a legal and financial accounting standpoint, the term "deposit" is used by the banking industry in financial statements to describe the liability owed by the bank to its depositor, and not the funds that the bank holds as a result of the deposit, which are shown as assets of the bank.

For example, a depositor opening a checking account at a bank in the United States with $100 in cash surrenders legal title to the $100 in cash, which becomes an asset of the bank. On the bank's books, the bank debits its currency and coin on hand account for the $100 in cash, and credits a liability account (called a demand deposit account, checking account, etc.) for an equal amount. (See double-entry bookkeeping system.)

In the audited financial statements of the bank, the $100 in currency would be shown on the balance sheet as an asset of the bank on the left side, and the deposit account would be shown as a liability owed by the bank to its customer, on the right side of the balance sheet. The bank's financial statement reflects the economic substance of the transaction—which is that the bank has borrowed $100 from its depositor and has contractually obliged itself to repay the customer according to the terms of the agreement. To offset this deposit liability, the bank now owns the funds deposited (either in notes and coin or more usually as a debt owed by another bank) and the bank shows those funds as an asset of the bank. These "physical" reserve funds may be held as deposits at the relevant central bank and will receive the interest as per monetary policy.

Typically, an account provider will not hold the entire sum in reserve, but will loan most of the money out to other clients, in a process known as fractional-reserve

banking. This allows providers to earn interest on the asset and hence to pay out interest on deposits.

By transferring the ownership of deposits from one party to another, banks can avoid using physical cash as a method of payment. Commercial bank deposits account for most of the money supply in use today. For example, if a bank in the United States makes a loan to a customer by depositing the loan proceeds in that customer's checking account, the bank typically records this event by debiting an asset account on the bank's books (called loans receivable or some similar name) and credits the deposit liability or checking account of the customer on the bank's books. From an economic standpoint, the bank has essentially created economic money (although not legal tender). The customer's checking account balance has no dollar bills in it, as a demand deposit account is simply a liability owed by the bank to its customer. In this way, commercial banks are allowed to increase the money supply (without printing currency, or legal tender).

Regulatory protection

Banks are normally subject to prudential regulation which has the purpose of reducing the risk of failure of the bank. It may also have the purpose of reducing the extent of depositor losses in the event of bank failure.

Bank deposits may also be insured by a deposit insurance scheme, if applicable.

Objectives

After studying this lesson, you will be able to:

classify bank deposit accounts; discuss the steps to be taken for opening a Savings Bank Account; and describe the procedure of operating a Savings Bank Account.

Business Studies

Types of Bank Deposit Accounts

Bank deposits serve different purposes for different people. Some people cannot save regularly; they deposit money in the bank only when they have extra income. The purpose of deposit then is to keep money safe for future needs. Some may

want to deposit money in a bank for as long as possible to earn interest or to accumulate savings with interest so as to buy a flat, or to meet hospital expenses in old age, etc. Some, mostly businessmen, deposit all their income from sales in a bank account and pay all business expenses out of the deposits. Keeping in view these differences, banks offer the facility of opening different types of deposit accounts by people to suit their purpose and convenience.

On the basis of purpose they serve, bank deposit accounts may be classified as follows:

a. Savings Bank Account

b. Current Deposit Account

c. Fixed Deposit Account

d. Recurring Deposit Account.

Let us briefly note the nature of the above accounts.

a. Savings Bank Account :

If a person has limited income and wants to save money for future needs, the Saving Bank Account is most suited for his purpose. This type of account can be opened with a minimum initial deposit that varies from bank to bank. Money can be deposited any time in this account. Withdrawals can be made either by signing a withdrawal form or by issuing a cheque or by using ATM card. Normally banks put some restriction on the number of withdrawal from this account. Interest is allowed on the balance of deposit in the account. The rate of interest on savings bank account varies from bank to bank and also changes from time to time. A minimum balance has to be maintained in the account as prescribed by the bank.

b. Current Deposit Account:

Big businessmen, companies and institutions such as schools, colleges, and hospitals have to make payment through their bank accounts. Since there are restriction on number of withdrawals from savings bank account, that type of account is not suitable for them. They need to have an account from which withdrawal can be made any number of times. Banks open current account for

them. Like savings bank account, this account also requires certain minimum amount of deposit while opening the account. On this deposit bank does not pay any interest on the balances. Rather the accountholder pays certain amount each year as operational charge.

For the convenience of the accountholders banks also allow withdrawal of amounts in excess of the balance of deposit. This facility is known as overdraft facility. It is allowed to some specific customers and upto a certain limit subject to previous agreement with the bank concerned.

c. Fixed Deposit Account (also known as Term Deposit Account):

Many a time people want to save money for long period. If money is deposited in savings bank account, banks allow a lower rate of interest. Therefore, money is deposited in a fixed deposit account to earn a interest at a higher rate.

This type of deposit account allows deposit to be made of an amount for a specified period. This period of deposit may range from 15 days to three years or more during which no withdrawal is allowed. However, on request, the depositor can encash the amount before its maturity. In that case banks give lower interest than what was agreed upon. The interest on fixed deposit account can be withdrawn at certain intervals of time. At the end of the period, the deposit may be withdrawn or renewed for a further period. Banks also grant loan on the security of fixed deposit receipt.

d. Recurring Deposit Account:

This type of account is suitable for those who can save regularly and expect to earn a fair return on the deposits over a period of time. While opening the account a person has to agree to deposit a fixed amount once in a month for a certain period. The total deposit along with the interest therein is payable on maturity. However, the depositor can also be allowed to close the account before its maturity and get back the money along with the interest till that period. The account can be opened by a person individually, or jointly with another, or by the guardian in the name of a minor. The rate of interest allowed on the deposits is higher than that on a savings bank deposit but lower than the rate allowed on a fixed deposit for the same period.

Recurring Deposit Accounts may be of different types depending on the purpose underlying the deposit. Some of these are as follows:

a. Home Safe Account (also known as Money Box Scheme): Small savers find it convenient to deposit money under this scheme. For regular savings, the bank provides a safe or box (Gullak) to the depositor. The safe or box cannot be opened by the depositor, who can put money in it regularly, which is collected by the bank’s representative at intervals and the amount is credited to the depositor’s account. The deposits carry a nominal rate of interest.

b. Cumulative-cum-Sickness Deposit Account: Regular deposits made in this type of account serve the purpose of having money to meet large expenses in case there is sudden illness or other unforeseen expenses. A certain fixed sum is deposited at regular intervals in this account. The accumulated deposits over time along with interest can be used for payment of medical expenses, hospital charges, etc.

c. Home Construction deposit Scheme/Saving Account: This is also a type of recurring deposit account in which money can be deposited regularly either for the purchase or construction of a flat or house in future. The rate of interest offered on the deposit in this case is relatively higher than in other recurring deposit accounts

How to open a Savings Bank Account

To open a savings bank account in a commercial bank, you have to first decide what amount of money you would like to deposit initially. You may enquire and find out from the nearest bank what is the minimum amount to be deposited while opening a savings bank account. You have to deposit at least that amount or more, if you want. On entering a bank (any branch of a bank) you will find a counter for enquiry (or a counter with: ‘May I help you’ board). Having known the minimum amount to be deposited, you should ask for a form of application for opening Savings Bank Account. You are not required to pay anything for it. You should then take the following steps:

Filling up the Form

The application form has to be filled up giving the following necessary information:

a. Name of the person (applicant)

b. His/her occupation

c. Residential Address

d. Specimen signature of the applicant

e. Name, address, account number and signature of the person introducing the applicant Bank Deposit Account

Besides the above information you have to give an undertaking that you will abide by the rules and regulations of the bank, which are in force. At the end of the application form, you have to put your signature. (In some banks it is required to attach two passport size photographs of the applicant along with the application.)

ii. Proper Introduction

Every bank requires that a person known to the bank should introduce the applicant. It may be convenient to be introduced by a person having already an account in that bank. Some banks may accept the attested copy of Passport or Driving Licence, if any, of the applicant. In that case personal introduction is not necessary. Introduction is required to prevent the possibility of opening of account by an undesirable person.

iii. Specimen Signature

The applicant has to put his/her specimen signatures at the blank space provided on the application form for that purpose. In addition, specimen signatures have to be put separately on a card on which a photograph of the applicant may be pasted, along with his/her name and account number.

After the above steps have been taken and the officer concerned is satisfied that the application form is in order, money is to be deposited at the cash counter after filling in a printed ‘Pay-inslip’. An account number will then be allotted and written on the application form as well as the card having your specimen signatures. At the same time you will be issued a Passbook with the initial deposit recorded in it. All future deposits and withdrawals will also be entered in the passbook, and it will remain with you. If you want to use cheques for withdrawal

or payment of money out of your deposits, a cheque book will be issued on your request. A cheque form is a printed form in which you may issue an order to the bank to pay the amount specified in it to a person.

Procedure for Operating Savings Bank Account

Once you have opened the account, you must also know how to operate the account. In other words, you have to know the procedure to be followed for further deposits to be made in the account and for withdrawing money from the account.

i. Deposit in the Account

How will you deposit money in your account? You have already used a ‘Pay-in-slip’ for deposit of the initial amount while opening your account. It is a printed form, which you get in the bank.

Each ‘pay-in-slip’ has two parts divided by perforation, the right-hand part known as ‘foil’ and the left-hand part known as ‘counter-foil’. The slip has to be filled up while depositing cash or a cheque. Separate pay-in-slip form will have to be filled up while depositing both cash and cheques.

Suppose you have to deposit cash in your account. The pay-in-slip has to be filled giving the date of deposit, your name or account-holder’s if you deposit money in somebody’s account, account number, and the amount deposited in figures and words. Besides you have to enter on the slip, in the place indicated, how many currency notes of different denominations (Rs. 5, 10, 20, 50, 100, etc.) are being deposited along with the amount against the types of notes. The bank will have a counter for cash receipts. You have to sign and present the pay-in-slip there and also hand over the amount of cash. The receiver will keep the foil (right hand part) of the pay-inslip while the left-hand part (counter-foil) will be rubber-stamped, signed by him, and returned to you.

Instead of cash, suppose you have to deposit cheque, which you have got in payment of your salary from the office in which you are employed. You may like to deposit it in your bank account instead of going to another bank to encash it. Your bank will collect the amount of the cheque and record it as a deposit in your savings bank account.

To deposit the cheque you have to use the pay-in-slip again, filling in particulars like the date of deposit, the account number, name of the account-holder, the serial number and date of the cheque, name and address of the bank on which the cheque is drawn, and the amount of the cheque in figures and words. After signing the slip, you have to attach the cheque with the foil by an awl pin, and present the slip at the counter for cheque receipt. The person at the counter will keep the foil with the cheque attached, and return to you the counter-foil with bank rubber stamp and his signature. In some banks, there is a box kept near the counter. The bank rubber stamp is also available at the counter. The depositor is to put the rubber stamp on the foil and counterfoil. Then after separating the counter-foil, the cheque along with the foil is to be dropped in the box through a slit.

ii. Withdrawal from Deposit Account

You deposit your savings for use in future. The need for money may arise any time. So you should know how to get back your money from the bank. In the above section you have learnt about the procedure for deposit of money in the savings bank account. Let us know the procedure for withdrawal of money from your account.

Money can be withdrawn by using

a) Withdrawal form

b) Cheque

c) ATM card

a. Withdrawal Form: Every bank has printed withdrawal forms, which can be used by accountholders to withdraw cash from deposit accounts.

The form has to be filled in, mentioning the date of withdrawal, account number, amount to the withdrawn (in figures and words) and the signature of the account holder. You have to produce it along with your passbook at the counter at which your account is handled. At the counter the officer concerned generally passes the form for payment after checking the balance in the account and the signature on the form against the specimen signatures on record. The amount of withdrawal is recorded in the passbook, and payment is made at the counter if the amount is

within a certain limit (say, Rs. 5,000), otherwise a disc or token is given which bears a number. This has to be presented at the cash payment counter for receiving the amount withdrawn.

b. Cheque: As an account-holder you can withdraw cash from your savings bank account either by filling in and signing a withdrawal form or by issuing a cheque. Withdrawal forms can be used only by the account-holder, no one else.

Cheques can also be issued for payment to other parties. Thus, a cheque issued to another person can be either encashed by him at the bank, or deposited in his account in some other bank to be collected on his behalf.

Withdrawal by issue of cheque requires the same procedure to be followed as that for withdrawal by filling in and signing the withdrawal form explained above. In both cases the amount of withdrawal is recorded in the books of the bank in the relevant savings bank account. Interest allowed on the balance of deposit is also recorded in the relevant accounts maintained in the books of account of the bank. These are also entered in the Pass Book as and when presented by the account-holder to the bank.

c. ATM Card: Banks issue ATM card to its depositors for easy withdrawal of money from their accounts. This card is used for withdrawal of money from saving and current deposit account through Automated Teller Machine (ATM). It is a magnetic card, which can be operated by using a particular secrete number. It is the most convenient system of withdrawal of money.

Teller Counters : To facilitate quick transaction, banks provide teller counters to withdraw money from the deposit account. There are two types of teller counters:

a) Manual teller counter; and

b) Automatic teller counter.

In manual teller counters banks generally allow withdrawal of money from the savings accounts for amount upto a limit (which may be from Rs. 5,000 to Rs. 10,000). The cheque or withdrawal form is presented at the counter and payment is made after verifying the balance in the account, and tallying the specimen signature of the account holder.

In automatic teller counters ATMs are installed to handle cash transactions 24 hours without any break. There is no need to appoint any body to verify your balance, compare the specimen signature or hand over or take over the cash. Let us learn how an ATM machine operates.

When a bank installs ATMs, it gives a magnetic card along with a secret code number to every accountholder. This code number is called Personal Identification Number (PIN). When a cardholder wants to withdraw or deposit money, first he has to establish his identity to operate the ATM by mentioning his PIN. When an ATM card is inserted into the machine it asks for the PIN. The PIN can be entered either by using the keyboard or touching the screen of the machine. Once the identity is established then money can either be deposited or withdrawn simply by following the instruction given by the machine. For deposit of cash it is required to keep the amount in a special envelop, which is available at the ATM center. After sealing the envelope and writing the necessary information on it, the envelope will be kept near a slit. Then on pressing the deposit button the envelope will automatically be entered into the machine. The bank officials will collect those envelops at regular interval and credit the amount in the respective accounts. Similarly, withdrawal of money can be made by pressing or touching the withdrawal button and then mentioning the amount of money required. The exact amount of money will be made available to you instantly through the outlet.