This document discusses bank deposits, including the types of deposits, factors that affect deposits, and measures to increase deposits. It also covers pricing deposits, "Know Your Customer" guidelines for opening accounts, deposit insurance, and non-deposit sources of funds for banks.

1. Bank Deposits
• Deposits
– It is a major source of funds for banks
• Types of Deposits
– Demand Deposit
– Time Deposit
• Demand Deposits further sub-divided
– Current Deposit
– Saving Deposit

2. Pricing of the deposits
• Banks need to monitor the cost of their
funding sources because of
– Change in cost of funding would require
changes in assets yield
– It can alter liability mix and liquidity
– It will affect competitiveness of the bank in
the market

3. Factors to be considered while
deciding pricing of deposits
• Service cost and minimum balance
requirement
• Deposit volume
• Lending and investment avenues
• Relationship with customer
• In case of new product, promotional
pricing
• Product differentiation

4. Factors affecting bank deposits
• Increase in national income
• Expansion of banking facility
• Increase of banking habit
• Increase in the relative rate of return on
deposit
• Increase in deficit financing
• Increase in bank credit
• Inflow of deposits from NRIs

5. Measures to increase bank
deposits
• Offering properly graded interest rate on
term and saving deposit
• Raising deposit insurance cover
• Discontinuing TDS in respect of interest
income from deposits
• Improving internal efficiency and
reducing bad debts and frauds
• Improving customer service

6. General guide lines for opening
deposit accounts
• “Know Your Customer” guidelines
issued by RBI to be followed
• The objective is prevent financial fraud,
identify money laundering and criminal
activities and monitoring large value
cash transactions

7. Salient features of KYC norms
• Proper introduction while opening account is
necessary
• Identity of the account holder is to be
established
• Photograph of the account holder
• Proof of address is necessary
• Specimen signature of the account holder is
to be obtained
• Monitoring and reporting suspicious
transaction

8. Deposit Insurance
• In case of bank failure to protect the
saving of small depositors either fully or
in part
• Mostly Govt. established and managed
• May or may not be a part of Central Bk.
• DICGC in India (Up to Rs.100,000)
• Problem of moral hazard

9. When insured bank fails
• Insuring agency may ask some healthy
bank to take over failed bank
• It can take charge and manage
operation of failed bank till suitable
buyer is found
• It can pay off the deposit up to the
maximum amount insured

10. Non deposit source of funds
• Concept of “Funding Gap”
• It is the difference between current and
projected credit and deposit flows
• If projected credit > projected deposit
flow, bank need to raise additional funds
• If it is reversed, bank needs to find out
profitable investment avenues

11. Various non deposit sources
• Borrowing from Central Bank
• Certificate of Deposits
• Foreign Funds
• Commercial Papers
• Other Money Market borrowings

12. Selection of non deposit source
• Factors to be considered while selecting
non deposit source
– Cost
– Risk
– Period for which the funds required
– Prevailing regulations for each of these
sources