The activity of a commercial bank is based on a banking operation to attract funds to deposits.
This process takes place on the terms of payment, repayment and profitability for the bank as a whole.
A deposit account is an account opened in the name of a depositor and allows making payments for goods and services, receiving cash using a card, buying securities, paying bills and performing other financial transactions. Deposit accounts can be short-term, medium-term and long-term.
For short–term deposits, interest is paid once or twice a year, for medium–term deposits – quarterly, and for long-term deposits – monthly.
The Bank may provide deposits of its choice, which is stipulated in the agreement between the client and the bank.
The funds deposited by the client to the bank are his property, which is not subject to return to him at the first request of the depositor. The funds held in the deposit account have a certain period, which is fixed in the deposit agreement, and are subject to return within a certain period.
All deposits are classified by their maturity dates.
This allows the bank to determine the level of interest rates for each of them, set a minimum deposit amount and offer customers more favorable conditions.
In addition, the amount of interest rate is affected by the degree of risk inherent in a particular deposit. The longer the term of the deposit, the greater the risk, respectively, the higher the interest rate for its use.
Deposits are divided into:
- on demand;
Term deposits are deposits attracted by banks for a certain period with interest payments.
Demand deposits (current accounts) are intended for performing settlement operations.
Their owner can receive funds on demand. For this reason, they have the lowest percentage compared to other types of deposit accounts.
However, if we take into account that these investments represent a source of funds for the bank’s work with the clientele, then their attractiveness is obvious.