What is Deposit and Types of Deposit in Nepal

What is Deposit and Types of Deposit

What is Deposit?

For a bank, deposit if the amount of money collected by the Bank and Financial Institutions from its client. Collecting deposit is primary function of the bank and financial institutions.

Deposit can be explained with the following points

  • Deposit is the amount taken from the customer
  • Deposit is the amount deposited by the customer
  • Collecting deposits is the core function of the bank
  • Various types of accounts such as Saving A/C, Current A/C, Fixed A/C, Margin Call A/C are used to collect the deposit
  • Deposit is the liability if the BFIs
  • The deposit can be interest-bearing and non-interest-bearing.
  • Deposits are the primary source of lending.
  • Deposit is assets of the customer and the bank has to repay back to the customer in demand

Read – Fixed Deposit Interest Rate in Nepal

Types of Deposit

There are various ways a bank can collect deposit from its customers. Deposit can be classified into various types on the basis of currency, interest, time, collection, and nature. They are as follow.

On the basis of currency

  1. Local currency deposit
  2. Foreign currency deposit

On the basis of interest

  1. Interest bearing deposit
  2. Non-interest bearing deposit

On the basis of time or tenure

  1. Demand deposit
  2. Term deposit (time deposit)

On the basis of collection

  1. Recurring deposit
  2. Non-recurring deposit

On the basis of nature

  • Fixed account deposit
  • Saving account deposit
  • Current account deposit
  • Margin account deposit
  • Call account deposit

Current Deposit vs Saving Deposit vs Fixed Deposit

Current Deposit Saving Deposit Fixed Deposit
Non-interest bearing deposit Low interest-bearing deposit High interest-bearing deposit
No cost deposit low-cost deposit High-cost deposit
No restriction in deposit and withdrawal Restriction in withdrawal of the amount Withdrawal can be done only after the maturity period
Overdraft facility is Available Overdraft facility is not available No overdraft facility but loan facility can be availed
Suitable for big business houses and businessmen Suitable for general people Suitable for senior citizen, pansionaire, Retired person
The minimum balance of the A/C is greater than the saving amount Focused on saving money of customers for a short period. Focused on providing high-interest return

What is Call Deposit?

Call deposit is a hybrid of current and saving a deposit. Call deposit is interest-bearing wherein the rate of the interest depends upon the amount.

What is Margin Deposit?

A margin deposit is a non-interest-bearing deposit. No cheque can be issued in margin deposit.

Deposit Affecting Factors

There are various factors that affects deposit.  Major factors can be listed as follows.

  • Level of income
  • Consumption pattern
  • Saving pattern
  • Banking facility/Access/Literacy
  • Banking Technology and Instrument
  • Inflation pattern
  • Size of the economy
  • Interest Rate
  • Tax rate
  • Remittance
  • The flow of remittance
  • Investment opportunities
  • Banking access, literacy, and baking habit
  • Product of the bank and marketing
  • Clients behavior
  • The policy of the government  such as fiscal policy & monetary policy

What is Deposit Mobilization

Deposit mobilization is the process of mobilizing money in suitable and profitable banking activities. Deposit mobilization is the primary function of banks and financial institutions. Following are the fields where a bank can mobilize its deposit.

  1. Credit to the customers
  2. Liquid Fund (Cash at hand, at NRB, CRR/SLR)
  3. Fixed Asset (Land, Building, Vehicle, Equipment)
  4. Investment (Share, Bond, Debenture, Joint Venture)
  5. Operating and miscellaneous expenses

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