BANK LIABILITY
PRODUCTS
CONTENTS

Savings A/c

Current A/c

Modes of operation

Term Deposit

NRE/NRO/FCNR

SAFE DEPOSIT
ASSET AND LIABILITY

In households, we store our excess money with banks
9ref next fig.). Sometime one of us might need money
which we might not have. We then approach a bank
for borrowing money. Thus for lending us money bank
charges some additional percentage of money along
with the principal amount. Banks don’t have their own
money and so they lend from the deposited money.
The money deposited which lies with the bank earns
another interest, paid from the borrowers interest
expense. Therefore the deposited money is the banks
liability as interest is paid on that sum to the
depositor. On the other hand the loaned out money
becomes the asset for the bank and earns interest.
HOW BANKS CREATE MONEY
LIABILITY
ASSET
Bank
Your /
Depositors
money
Deposit
interest
Borrowers
loan
Loan
interest
TYPES OF LIABILITY


Demand liabilities are repayable on
demand.
Savings bank, current are examples Of
demand liability.
Time liabilities are liabilities which are
repayable after a specified period. Term
deposits are such.
ACCOUNTS FOR SAVINGS
 Minor
account
Age above 10yrs
 Account to be opened with association of a guardian
 School ID required
 Operation needs to be done by the guardian till minor
attain 13 yrs of age

 Joint
Account
Account opened by two people or more
 Operation as either equally, or survivor, former, both
jointly
 Bank doesn't have right to set-off
 Stop payment can be made by any of the holders

 HUF
The primary holder is the karta
 HUF special PAN card is required for a/c opening
 While the karta is supreme the major male coparceners
are also allowed to operate

 Partnership
firm a/c:

This a/c is opened to share profits of a business done by all or any one of them.

All partners need to operate account jointly

Demise of a partner will bring to closure
 Limited
Companies:

Can open a/c as a legal entity in form of public, private or govt.

Authorized signatories are critical here

Death of any opening member does not lead to stopping operations
 Trust
Account

The trust deed needs to be examined to understand the powers of the trustees

Insolvency of a member of the trust is not insolvency of the trust itself

All members need to operate jointly
 Opening


The account should be opened with the signatures of three persons ie:
presidents/ secretary / treasury where in presidents sig. is essential.
Fund can be with any bank approved by the registrar
 Accounts


account of co-operative societies
for govt. and public bodies
The main functions are: paying, receiving, collecting, and remitting
money on behalf of the govt. dept
There are no overdraft facicliities
HOW INTEREST IN SAVINGS IN ACCOUNT IS
CALCULATED
Prevailing rate of interest:
The rate of interest at present is 3.5%.
Interest calculation method:
Savings bank accounts are low cost running accounts opened for
saving purpose. In savings bank a/c interest is calculated on
monthly products. Product is the amount on which interest is
calculated. In SB a/c, product for a particular month is the
minimum balance between 10th and last day of the month. The
formula for calculating interest is:
Product X Rate of Interest
------------------------------ = INTEREST
12 X 100
MODE OF OPERATION
An Account may be operated in the names of an
individual in his/her own name or two or more persons
in their joint names
 Bank may send relevant material through courier or
post from time to time to the mailing address furnished
by the Customer
 The Customer is / are expected to examine the entries
in the Account statement on receipt,
 The Customer shall maintain the Account with a
minimum balance as prescribed by Bank
 Customers who attain the age of 60 years are required
to declare so to avail the benefits offered
 Transfer of account should be followed with given
request
 All account details should be safely maintained by the

ACCOUNT OPERATING INSTRUMENTS
Checks and
drafts
Debit and
credit cards
Phone and
internet
banking
ECS,
standing
instruction
MT,TT,TC
CURRENT ACCOUNT DEPOSITS

Opened for business purpose.

May be required to maintain a minimum balance

No interest is paid.

It needs a higher minimum balance to be maintained
as compared to the savings account.

No restriction for withdrawals.

Charges are collected for cheque book.
DORMANT ACCOUNTS
Banks may classify an Account as an inactive if
there are no customer-induced transactions for
12 months in the Account. Dormant if there are
no customer-induced transactions for 24 months
in the account.
 Customer induced transactions includes:
Transactions through cheque,Cash or cheque
deposit.Withdrawal or deposit through
ATM.Transaction through internet.Transaction
by standing instruction, ECS and
EFT.Inward/Outward bill.Mandate for crediting
interest earned on Fixed deposit to Savings Bank
Account.

DIFFERENCE BETWEEN CURRENT & SB
Current account
Savings account

Business purpose


Charges collected for cheque book


Higher minimum balance charges

Saving purpose
Charges not collected for cheque
book

Lower minimum balance charges

No folio charges
Folio charges are applied
TERM DEPOSITS



Deposits repayable after expiry of a fixed period say from 07 days
to 120 months are classified as term deposits. Term Deposits are
also called FDs and are repayable after the expiry of the specified
term varying from 7 days to 120 months. FDs are repayable only
after the specified term; therefore they are not as liquid as
savings deposits. Therefore, the rate of interest paid on FDs is
higher than the rate of interest on savings deposits.
The period is agreed upon by the Bank and the customer at the
time of deposit and may be varied by mutual consent. The rate of
interest is left to the banks discretion. Banks fix rates based on
their operational costs, however based on guidelines from RBI.
There is no restriction to accept deposits in odd amounts.
Accounts can be opened in the name of individuals, joint names,
business units like partnership firms, corporate (Private and
Public) societies, trust, clubs etc.
TERM DEPOSITS AVAILABLE
Short term
Fixed term
Reinvestment
deposit
Recurring
deposit
Flexi Fixed
deposit
• Standard fixed products
•Deposit can be kept up to 120 months.
•Compound interest. Principal and
interest paid on maturity.
•Fixed amount is deposited with monthly
frequency. Penalty is charged for
defaulted installment.
•TDS not applicable on interest earned.
Should be linked with operative
account.
Automatic sweep in & sweep out facility.
NRE/NRO/FCNR DEPOSIT
SAFE DEPOSIT LOCKERS

It is a facility provided by banks to their customers for safe keeping of
valuables , documents etc. A locker rent charge is to be paid by the locker
owner and there are two keys available one of which will be with the
banker the other with the owner. RBI permits banks to take actions
against non payment of rent or locker remaining un-operational for a
considerable period of time. RBI also instruct banks to open lockers
classifying the risk profile of the customer based on KYC. There may be
more than one owner for joint lockers owners.
LOCKER RENTS