Primary Functions — Accepting Deposits

Accepting deposits from the public is the most basic function of a commercial bank — it is the raw material a bank uses for all its other activities. Banks offer several types of deposit accounts, differing mainly in how easily the money can be withdrawn and the rate of interest paid.

• Savings Bank Account. Meant for individuals who want to save small sums regularly while still being able to withdraw money reasonably often. It offers a modest rate of interest and usually places some restriction on the number/amount of withdrawals allowed in a period, in exchange for greater liquidity than a fixed deposit.
• Current Account. Meant mainly for businesses and firms that need to deposit and withdraw money frequently, often many times a day. It usually pays no interest (or a very low rate), but in return places no restriction on the number of withdrawals, and often comes with an overdraft facility for the account holder.
• Fixed (Term) Deposit Account. A lump sum is deposited for a fixed period (ranging from a few months to several years) at a rate of interest that is generally higher than a savings account, since the bank has certain, undisturbed use of the funds for the agreed period. Premature withdrawal is usually allowed but attracts a reduced rate of interest/penalty.
• Recurring Deposit Account. A fixed sum is deposited every month for an agreed period (say, one to five years), at a rate of interest close to a fixed deposit, allowing a saver to build up a lump sum gradually through disciplined monthly saving.

| Basis | Savings Account | Current Account | Fixed Deposit | Recurring Deposit |

|---|---|---|---|---| …