Q.Explain the different types of deposit accounts offered by a commercial bank.

Banks offer several deposit account types designed for different combinations of liquidity need and interest earned, from the most flexible to the most fixed.

A commercial bank offers four main types of deposit accounts:

1. Savings Bank Account — for individuals saving small sums while retaining reasonable liquidity; earns a modest rate of interest but usually restricts the number/amount of withdrawals in a period.
2. Current Account — for businesses needing to deposit and withdraw frequently, even several times a day; usually pays nil or very low interest but allows unlimited transactions, often with an overdraft facility.
3. Fixed (Term) Deposit Account — a lump sum deposited for a fixed period at a higher rate of interest than a savings account, since the bank has certain use of the funds for that period; premature withdrawal is usually allowed at a reduced rate.
4. Recurring Deposit Account — a fixed sum deposited every month for an agreed period, at an interest rate close to a fixed deposit, letting a saver build up a lump sum through disciplined regular saving.

Each account type trades off liquidity against interest earned differently, letting different types of customers (households saving small amounts, businesses transacting frequently, or savers with either a lump sum or a monthly surplus) choose the account best suited to their need.

Describing only two of the four account types, or confusing Fixed Deposit (a one-time lump sum) with Recurring Deposit (a series of monthly deposits) — the two are often mixed up despite serving different saving patterns.