Bank Deposits : Perhaps the simplest of investment avenues, by opening a bank account and depositing money in it one can make a bank deposit. There are various kinds of bank accounts: current account, savings account and fixed deposit account. While a deposit in a current account does not earn any interest, deposit in other kinds of bank accounts earn interest. The important features of bank deposits are as follows:
- Deposits in scheduled banks are very safe because of the regulations of the Reserve Bank of India and the guarantee provided by the Deposit Insurance Corporation, which guarantees deposits upto 1,00,000 per depositor of a bank.
- There is a ceiling on the interest rate payable on deposits in the savings account.
- The interest rate on fixed deposits varies with the term of the deposit. In general, it is lower for fixed deposits of shorter term and higher for fixed deposits of longer term.
- If the deposit period is less than 90 days, the interest is paid on maturity; otherwise it is generally paid quarterly.
- Bank deposits enjoy exceptionally high liquidity. Banks now offer customers the facility of premature withdrawals of a portion or whole of fixed deposits. Such withdrawals would earn interest rates corresponding to the periods for which they are deposited.
- Loans can be raised against bank deposits.
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