Page 50 - DMGT303_BANKING_AND_INSURANCE

Unit 3: Concept of Retail Banking

bank guarantee contains an undertaking to pay the amount without any demur on mere demand Notes
of the principal amount on the ground for non-performance or breach of contract.
Fiduciary relationship: Every relation of trust and confidence is a fiduciary relation. A banker
who receives a customer’s money is under a duty not to part with it which is inconsistent with
the customer’s fiduciary character and duty. In Official Assignee v. Rajaram Aiyar, it was held that
where banks old money for a specific purpose of sending it somebody the money is impressed
with trust.

3.4.2 Types of Accounts

1. Transactional Account

A transactional account is 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.
Transactional accounts are meant neither for the purpose of earning interest nor for the purpose
of savings, but for convenience of the business or personal client; hence they tend not to bear
interest. Instead, a customer can deposit or withdraw any amount of money any number of
times, subject to availability of funds.
A transactional account is known as a checking account (or chequing account) in North America,
and as a current account or cheque account in the United Kingdom, Hong Kong, India and some
other countries. Because money is available on demand it is also sometimes known as a demand
account or demand deposit account (DDA), except in the case of NOW accounts in the U.S., which
are technically distinct.

2. Deposit Account

A deposit account is a current account, savings account, or other type of bank account, at a
banking institution that allows money to be deposited and withdrawn by the account holder.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 represent the amount owed by the bank to the customer. Some banks
charge a fee for this service, while others may pay the customer interest on the funds deposited.
There are various types of deposit accounts:

Checking accounts: 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.
Money market account: A deposit account with a relatively high rate of interest, and short
notice (or no notice) required for withdrawals. In the United States, it is a style of instant
access deposit subject to federal savings account regulations, such as a monthly transaction
limit.
Savings accounts: 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.

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