Acceptance of Deposit by Banks in India
As per section 5(b) of Banking Regulation Act, 1949, “banking” means the accepting the deposits of money from the public for the purpose of lending or investment. The deposits is repayable on demand or otherwise, and withdrawal by cheque, draft, order or other wise. The section 35A of Banking Regulation Act confers powers on RBI to give directions in relations to acceptance of Deposit by Banks. RBI may issue directions to prevent the affairs of any banking company being conducted in a manner detrimental to the interests of the depositors.
Types of Deposit (Acceptance of Deposit)
A bank may accept deposit in the form of current, savings or term deposit.
Interest Rate on Deposit
- Saving Deposits: The interest rates of domestic savings deposits accounts held by residents in India has been deregulated by RBI with effect from October 25, 2011. Banks are free to determine their savings bank deposit interest rate. The scheduled commercial banks were advised to calculate interest on savings bank accounts on a daily product basis with effect from April 1, 2010.
- Term Deposits: With effect from October 22, 1997, RBI has given the freedom to commercial banks to fix their own interest rates on domestic term deposits of various maturities with the prior approval of their respective Board of Directors/Asset Liability Management Committee (ALCO). Banks are allowed to offer differential rates of interest on term deposits on the basis of tenor. Banks are allowed to offer differential rates of interest on the basis of quantum for single term deposits of Rs 2 crore and above.
- Current Deposit: No interest is generally paid on deposits held in current accounts of Bank.
- NRE/NRO Deposit: Banks have the freedom to determine the maturity/tenor of the deposit subject to the condition that minimum tenor of NRE term deposits shall be one year and that of NRO term deposits shall be seven days.
- Return of unclaimed deposits: Banks have to submit return every year to the Reserve Bank submitting details of all accounts which have not been operated upon for ten years. The return should be filed within 30 days after the close of each calendar year.
- Depositor Education and Awareness Fund: The section 26A of Banking Regulation Act empowered RBI to establish The Depositor Education and Awareness Fund. The amount to the credit of any account in India with any bank which has not been operated upon for a period of ten years or any deposit or any amount remaining unclaimed for more than ten years is credited to the Fund, within a period of three months from the expiry of the said period of ten years. The Fund is utilized for promotion of depositors’ interest and for such other purposes which may be necessary for the promotion of depositors’ interests.
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