Page 60 - DMGT303_BANKING_AND_INSURANCE

Unit 3: Concept of Retail Banking

3.8 Reserve Bank of India’s Model Policy on Bank Deposits Notes

One of the important functions of the bank is to accept deposits from the public for the purpose
of lending. In fact, depositors are the major stakeholders of the banking system. The depositors
and their interests form the key area of the regulatory framework for banking in India and this
has been enshrined in the Banking Regulation Act, 1949. The Reserve Bank of India is empowered
to issue directives/advices on interest rates on deposits and other aspects regarding conduct of
deposit accounts from time to time. With liberalization in the financial system and deregulation
of interest rates, banks are now free to formulate deposit products within the broad guidelines
issued by RBI.

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Caution Banks also provide for advances/loan against the recurring deposit, payment of
irregular and discontinued recurring deposit account etc. The investor should refer to the
related guidelines of the bank where recurring deposit is intended to be opened.

3.8.1 Types of Deposit Accounts

While various deposit products offered by the bank are assigned different names. The deposit
products can be categorised broadly into the following types. Definition of major deposits
schemes are as under:

(i) “Demand deposits” means a deposit received by the bank which is withdrawable on
demand;
(ii) “Savings deposits” means a form of demand deposit which is subject to restrictions as to
the number of withdrawals as also the amounts of withdrawals permitted by the Bank
during any specified period;
(iii) “Term deposit” means a deposit received by the bank for a fixed period withdrawable
only after the expiry of the fixed period and include deposits such as Recurring/Double
Benefit Deposits/Short Deposits/Fixed Deposits/Monthly Income Certificate/Quarterly
Income Certificate etc.;
(iv) Notice Deposit means term deposit for specific period, but withdrawable on giving at
least one complete banking day’s notice;
(v) “Current Account” means a form of demand deposit wherefrom withdrawals are allowed
any number of times depending upon the balance in the account or up to a particular
agreed amount and will also include other deposit accounts which are neither Savings
Deposit nor Term Deposit.
3.8.2 Account Opening and Operation of Deposit Accounts

The bank, before opening any deposit account will carry out due diligence as required
under “Know Your Customer” (KYC) guidelines issued by RBI and or such other norms or
procedures adopted by the Bank. If the decision to open an account of a prospective
depositor requires clearance at a higher level, reasons for any delay in opening of the
account will be informed to him and the final decision of the bank will be conveyed at the
earliest to him.

The account opening forms and other material would be provided to the prospective
depositor by the Bank. The same will contain details of information to be furnished and
documents to be produced for verification and or for record, it is expected of the Bank

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