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Deposits with fixed period and savings deposits in banks

Category: Concept of the Bank and the Banking System

Deposits with fixed period and savings deposits represent the most stable part of deposit resources. Term deposits — it funds deposited in the bank for a fixed term. They are divided into:

— The actual deposit with fixed period;

— Deposits with advance notice of withdrawal of funds. Banks in Western Europe and the U.S. share of the actual term deposits accounted for over 60% of all deposit resources.

Proper deposit in terms of holding funds on deposit with the fall term:

up to 30 days;

from 31 to 90 days;

from 91 to 180 days;

from 181 to 360 days;

More than 360 days.

On deposits with fixed period with advance notice of withdrawal of funds from the banks require the depositor a special application for withdrawal. Time limits for filing such statements to specify in advance, and therefore they set the value of the interest. Timing of the notification of withdrawal of funds may vary from 7 days to several months depending on the term deposit. An example of a deposit with advance notice may deposit with the schedule of spending money.

Thus, the fixed deposit (deposit) has a clearly defined period of time on it is paid, usually a fixed percentage and restrictions are imposed for early withdrawal of contributions. When withdrawal of deposit before a specified time period the bank charges a fee in the amount of pre-determined percentage of the value of the deposit and the date of withdrawal.

The most characteristic features of deposits with fixed period and deposits with:

— Can not be used for calculations, and are not written settlement documents;

— Funds due to turn around slowly;

— Pay a fixed rate with a maximum interest rate in some periods may be regulated by central banks;

— Set the requirement of prior notification of the bank depositor on withdrawal of money;

— Is determined by the lower rate of mandatory reserves.

Savings accounts (deposits) have no fixed term.

The most common types of personal savings accounts is a savings deposit with the book, which is characterized by:

— Lack of a fixed term deposit money;

— Does not require notice of withdrawal of funds;

— And when you make withdrawals from the account presented a passbook, which reflects the movement of funds.

In the domestic banking practice savings accounts are only opened to individuals. In foreign practice, these accounts can be opened as non-profit organizations and business firms. Paid on savings accounts interest rates are generally lower than on term deposits.

There are different kinds of savings deposits offered by individuals: immediate, urgent additional contributions, winning, money-winning duffel; target, current, with advance notice of withdrawal of funds, etc. For banks, the value of savings deposits is that with their help mobilizing unused income and are transformed into productive capital.

Term savings deposits: Set a fixed period or term during which the contribution can not be deleted. On deposits with fixed period by the bank paid the highest percentage compared with other types of savings deposits.

Savings deposits with additional contributions. On this account regularly paid a predetermined amount of money and savings are paid on a certain date (New Year’s contributions at the time of maturity, etc.).

Current savings deposits allow free entry and withdrawal, and are mainly used for transfer of salaries, pensions, payment of regular fees. For these deposits accrues the minimum interest rate. In western practice, these accounts can be «linked» to the term deposit for automatic reinforcement balance in case of lack of funds to make payments to this account.

In practice, U.S. banks in 1982, there were money market accounts — which were classified as savings accounts in determining the reserve requirements.

The features of these accounts are as follows:

— The interest rate on the account changes each week depending on changes in rates of other money market instruments;

— The period of contribution not specified, but the banks may require notice of withdrawal no later than 7 days;

— Deposits insured by the Federal Deposit Insurance Corporation;

— The account holder has the right to carry not more than six transfers from the account per month for payments to third parties;

— There are no restrictions for withdrawals by mail or personal appearance of the account holder in the bank.

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