Page 77 - DCOM208_BANKING_THEORY_AND_PRACTICE

Banking Theory and Practice

Notes 5.3.1 Current Account

An account which can be operated any number of times on a working day without any restriction
on the number and amount of withdrawals is known as a current account. As the banker is under
a responsibility to repay these deposits on demand, they are called deemed deposits.
Current accounts suit the requirements of joint stock companies, public authorities, corporations,
etc. whose banking transactions happen to be numerous per day. Cheque facility is available for
the investo.
A current account carries certain privileges which are not available to other account holde

1. Third party cheques and cheques with endoements may be deposited in the current account
for collection and credit.
2. Overdraft facilities are given in case of current accounts only.

3. The loans allowed by banks to their custome are not given in the form of cash but via the
current accounts. Thus current accounts earn interest on all types of advances allowed by
the banker.

5.3.2 Savings Account

The main purpose of savings accounts is encouraging savings of households. The main features
of savings account are:
1. Restriction on withdrawals: In the interest of the objective of savings bank accounts, the
banks levy certain limitations on the right of depositor to withdraw money within a
given period. The number of withdrawals over a period of 6 months is limited to 50.
Minimum amount to withdraw by a withdrawal form is ` 1 and that from a cheque is ` 5.
2. Restriction on deposits: The banks do not accept cheques or other official documents
payable to a third party for the purpose of deposit in the savings account.
3. Minimum balance: There is a minimum balance that needs to be maintained in the SB
accounts as prescribed by the banks and specific charges are levied if the minimum balance
is not maintained.
4. Payment of interest: The rate of interest payable by the banks on deposits maintained in
savings accounts is prescribed by the RBI. Interest is computed at quarterly or longer rests
of period.

5. Cheques: Cheque facility is provided to the deposito only when they keep a minimum
balance with the bank according to its rules. Only cheques payable to the custome having
SB accounts are collected.

6. Prohibition on savings account: The RBI has forbade the banks to open a savings account
in the name of
(a) Trading or business concern.

(b) A company or an association.
(c) Government departments.
(d) Bodies depending upon budgetary allocations for performance of their functions.

(e) Municipal corporations.

72 LOVELY PROFESSIONAL UNIVEITY