One of the most essential aspects in the functioning of a bank is to accept the deposits from public. Hence it is necessary to classify the deposits; basically there are basically three types of deposits –
1. Time or term deposits – These are those deposits that are deposited by savers for a fix period of time hence they can withdrew the deposit only on the maturity of deposit. If it is withdrawn in advance then it involves penalty. They offer the maximum amount of interest.
2. Saving deposits – This is a kind of demand deposit and there is certain limit on number of withdrawals from the account during a specific period of time, also account holder has to maintain minimum balance in the account which is decided by the bank, non compliance of which leads to penalty. Interest rates offered on these deposit is lower than that of term deposits.
3. Current deposits – Though it is similar to saving deposit but it does not offer any interest and hence there is no limit on the number of withdrawals by individuals from his account. This type of account is normally maintained by companies and individuals who have higher frequency of withdrawing from their accounts.
Apart from above there is another type of deposit which is called recurring deposit in which individual will have to pay a small sum every month for a particular period of time; it can be on a daily, weekly or monthly basis. The interest offered on this is almost equivalent to that of term deposits.