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Types of bank account and banks …

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Types of bank account and banks functions
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Gaurav Seth 3 years, 11 months ago

Primary Functions

1. Accepting Deposits: Accepting deposits is the main function of commercial banks. Banks offer different types of Bank accounts to suit the requirements and needs of different customers. Different types of Bank accounts areas follows:

A. Fixed Deposit Account: Money is deposited in the account for a fixed period is called as Fixed Deposit account. After expiry of specified period ,person can claim his money from the bank. Usually the rate of interest is maximum in this account. The longer the period of deposit, the higher will be the rate of interest on deposit.

B. Current Deposit Account: Current deposit Accounts are opened by businessman. The account holder can deposit and Withdraw money. Whenever desired. As the deposit is repayable on demand, it is also known as demand deposit. Withdrawals are always made by cheque. No interest is paid on current accounts. Rather charges are taken by bank for services rendered by it.

C. Saving Deposit Account: The aim of a saving account is to mobilize savings of the public. A person can open this account by depositing a small sum of money. He can withdraw money from his account and make additional deposits at will. Account holder also gets interest on his deposit. In this account though the rate of interest is lower than the rate of interest on fixed deposit account.

D.Recurring Deposit Account: The aim of recurring deposit is to encourage regular savings by the people. A depositor can deposit a fixed amount, say Rs. 100 every month for a fixed period. The amount together with interest is repaid on maturity. The interest rate on this account is higher than that on saving deposits.

E. Multiple Option Deposit Account: It is a type of saving Bank A/c in which deposit in excess of a particular limit get  automatically transferred into fixed Deposit. On the other hand, in case adequate fund is not available in our saving Bank Account so, as to honour a cheque that we have issued the required amount gets automatically transferred from fixed deposit to the saving bank account. Therefore, the account holder has twin benefits from this amount (i) he can earn more interest and (ii) It lowers the risk of dishonoring a cheque.

2. Lending Money with the help of money collected through various types of deposits, commercial banks lend finance to businessman, farmers, and others. The main ways of lending money are as follows:

A. Term Loans: These loans are provided by the banks to their customers for a fixed period to purchases Machinery. Truck. Scooter. House etc. The borrowers repay the loans in Monthly/Quarterly/Half Yearly/Annual installments.

B. Bank Overdraft: The customer who maintains a current account with the bank, takes permission from the bank to withdraw more money than deposited in his account. The extra amount withdrawn is called overdraft. This facility is available to trustworthy customers for a small period. This facility is usually given against the security of some assets or on the personal security of the customer. Interest is charged on the actual amount overdrawn by the customer.

C. Cash Credit: Under this arrangement, the bank advances cash loan up to a specified limit against current assets and other securities. The bank opens an account in the name of the borrower and allows him to withdraw the borrowed money from time to time subject to the sanctioned limit. Interest is charged on the amount actually withdraw.

D. Discounting of Bill of Exchange: Under this, a bank gives money to its customers on the security of a bill of exchange before the expiry of the bill in ease of customers needs it. For this service bank charges discount for the remaining period of the bill.

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