Primary Deposit, Derivative Deposit - Definition,Types of Deposit

[ Types of deposit. Primary Deposits. Derivative Deposit. Demand Deposit. Term Deposit. Types of Primary Deposit. Special Notice Deposit. ]

INTRODUCTION:

There are two types of deposit that banks offer. One is Primary Deposit and the other is demand deposit. In this article I am going to write about types of deposits.

WHAT IS DEPOSIT?

Deposit is an account created in bank by the people who wants to store money in a safe place. The bank guarantees safety to the money. People can deposit and withdraw money from their account according to the terms and condition. 

TYPES OF DEPOSITS:

Primary Deposits: 

When a customer is the direct creator of deposit it is called primary deposit. Some time it is called as the passive deposit as the role of bank to create the account is passive.

Types of primary deposits:

1. Demand Deposits
2. Term Deposits

The demand deposits: The bank is liable to allow the depositors to withdraw money whenever they want for a demand deposit. The withdrawable amount depends on the terms and condition of the account. Currently banks allow the users to open three types of deposits. They are current account, saving account and special notice deposit ( It exit only in Bangladesh).

                     (i) Current Account: It facilitate the commerce. The business may need money at the urgent time. So, they create current account. There is no interest rate for current account because banks don't invest these money. They only provide safeguard to the money and charge the account holder in a year for their services.
                     (ii) Saving Account: Banks allow to deposit money multiple times in a month but allows to withdraw money for certain times only. This type of deposit is very popular among the lower income population. You can get a little amount of interest from this account. They get the full money at the maturity date. When you withdraw money you won't get the interest on the money that you withdrew.
                     (iii) Special Notice Deposit: This account is introduced in Bangladesh to facilitate purchasing IPO from share market. Banks allow the depositors to withdraw money from bank around 7 days of issuing notice. The depositors issue the notice. Interest rate depends on deposit amount. It is a short term deposit.

The term deposit: The bank returns fixed amount of money on the fixed time. It is also called the fixed deposit. It is also known as CD account or certificate of deposit in western world. In India they have another type of term deposit. It is Recurring Deposit. The depositors save money in the installment basis but get the benefits of FDR or CD account such as fixed amount of money and within fixed time.

Derivative Deposits:

When the bank is the direct creator of a deposit, it is called derivative deposit. Derivative deposit is created when:

1. When Loan is granted, banks don't give loan on hand. It creates an account and allows you to withdraw money from it.
2. At the time of discounting a bill
3. When bank purchase a government securities., bank creates an account in the name of the government and put money there. It is up to the government to withdraw money from there.

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Hope this helps.

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