Deposit Management PPP-4 Deposit Management * Deposit is the main component of bank’s fund. The existence of a commercial bank is totally impossible in the absence of deposits. So, every bank expects that deposits will be sufficient, safe and the flow of deposit will remain smooth. * Deposit management includes all activities related with bank deposits i.e. volume, Mixes, levels, ownership, movements and the like.Objectives of Bank Deposit * Collection of Bank Fund: Deposit collection and loan sanction is vital job of a bank. Bank collects interest income from the loan and to do So it attempts to attract deposit in many ways. * Ensure Productive investment of scattered Savings of the clients: A segment of people holds surplus money for saving. The people live scattered, The bank collects these scattered savings as deposits and invests those in the productive fields to facilitate the economic development of the country. * Extending the scope of Loan: Sometimes bank offers loans to the depositors in various multiplications i.e. double, triple or quadruple of their deposited money. The depositors deposit more money with intension of getting loan facilities. Objectives of Bank Deposit Fulfilling the access need for money: Bank provides overdraft facility, which means the opportunity of withdrawing more amounts than deposited. Maintaining Social Responsibility: On behalf of the clients and institutions, banks perform various social service-oriented activities like, discounting bill, payment of insurance premium, payment of electricity bill etc.. To avail these services, people often keep deposits in the banks.Level of Deposit at the Individual Banks Banks cannot collect targeted amount of deposits. There are some factors which influence the level of deposits in the banks: Competitive interest rates: Fluctuation of interest rate on deposits acts as the tool of attracting deposits. Interest rate varies from bank to bank in Bangladesh. Physical features of bank office: Well furnished and decorated bank office attracts more attention of the clients; clients feel comfort in banking which ultimately helps in raising deposits. Use of modern and electronic technology: Modern technologies like computer, ATM, EFTS, automated book keeping facilities of banks guarantees better service and thereby draw more deposits. Level of Deposit at the Individual Banks Skilled bank executives: Efficient and eligible staffs and employees of a bank work for raising acceptance and good impression by giving prompt services to the clients. Skilled bank executives help to ensure the standard of the service as well as increase the amount of deposits. Innovating newer services: By introducing innovative newer schemes, banks can encourage the clients to come to the banks with increasing amount of deposits. Inclusion of socially respected person in the board of directors: If the respected persons are appointed as a board of directors of the bank, people get more confidence and come to do business with bank.Level of Deposit at the Individual Banks * Attractive loan and investment schemes policy: Banks keep pace with the demand of the time and introduce new products and schemes as loan and investment for financing according to the changes needs of the depositors. Suitable location of the office: Deposit depends on the location of a bank. The more clients, the more transaction is occurred in bank that is situated in a better location. The more transaction brings more deposits for bank. Level of Deposit at the Individual | Banks Advantages of early start: An early starting bank in a good place is more capable to manage more deposits than a late starter. Old banks gain more attention from the clients and can attract more deposits because of being the early starter. Economic condition: The increase and decrease in deposit depends on the economic condition of the country. Good economic condition is favorable to deposit enhancement.Types of Deposit Accounts in Asian Countries There are variations in the needs and demands of the people. It is almost impossible for banks to satisfy all these diverse demands with a single type of account. That is why banks generally offer the following types of accounts to satisfy customers’ demand: * Current account * Savings Account * Term or fixed Deposit Account Sanne Pann ea Types of Deposit Accounts in Asian Countries Besides these three types of accounts, bank may also offer the following types of accounts: * Home saving Account * School saving Account * Women’s saving Account * Laborers’ saving Account * Insurance saving Account * Foreign Exchange saving Account * Post office saving Account * Deposit Pension Scheme * Loan Deposit Account * Recurring/Repeated Deposit Account on maturity |Deposit Processing Deposit processing starts from opening new accounts and ends in designing the framework of all the activities including the chequing deposits and withdrawls. The stages of bank deposit processing are stated below: New account Section Information about the account Providing application form, booklet Checking Permission of Manager Depositing Primary money Deposit Processing Data entry Delivery of Cheque book, pass book and deposit receipt Book keeping Depositor’s statement Review Influence potential depositorsDeposit Processing * New Account Section: In the beginning stage of opening an account, a depositor should be informed not only about the various types of accounts but also the type will be most convenient and beneficial for him/her. The depositors should also be informed about the necessary papers. * Acceptance of necessary application, photograph and documents: The official should collect the necessary documents from the depositors along with filled-in forms and photographs. * Checking: This section will check whether the documents provided are fake or not. This section also checks any types of error or omission in the submitted documents and forms Deposit Processing * Permission of managers: After examining, if the documents proved to be correct, these are sent to manager. Manager then considers whether the applicant will be allowed to open the account or not. If the applicant is found eligible according to the criteria of the bank, the manager will permit him/her to open his/her account with bank. * Deposit primary money: some primary money is to be deposited in order to open a bank account. Different types of account demands different amount of money. The required amount will be deposited filling up of a deposit slip.Deposit Processing * Data Entry: At the time of opening an account, a number is allotted for the account. This number is keyed in the computer under which all the information is kept safely. If and when require this unique number will help find the information regarding the particular customer and for the customer all transactions will be performed through the number given | his/her name. * Delivery of cheque book, pass book and deposit receipt: At this step, the necessary bookd, that is, cheque book, pass book and deposit receipts are given to the depositors for facilitating banking activities. Deposit Processing * Book-Keeping: Accounts must be maintained for every deposit account. For each account, a separate ledger page is maintained where each transaction of the depositors is listed * Depositor’s statement: bank will send the statement regarding the status of the accounts to the depositors.Deposit Processing * Review: Ata certain time interval, bank will review the statements of the depositors to check the status and activity in the accounts of the depositor. Bank will try to identify the depositors with ‘good’ category and with ‘bad or non-operating’ category. Bank will take initiatives to encourage the depositors with ‘good’ category and will advise the depositors with ‘bad’ category to improve the status of the account through more regular transactions. * Influence the potential depositors: The depositors whose transactions are regular and who perform transactions satisfactorily are encouraged with better advice and service. Special Types of Deposit Scheme Banks attempt to increase the volume of deposit. Special deposit scheme is one of them. Banks collect deposits for a fixed term promising attractive rate of interest to the depositors. Banks invest the deposits in more profitable sectors to earn better income. Special Deposit Schemes are the following:Special Deposit Schemes * Consumer Credit linked Deposit Scheme: This scheme is designed for small and fixed income consumers for getting loan to purchase durable goods i.e. tv, freeze, computer, air conditioner, furniture et.. To be eligible to get loan under the scheme , the clients need to deposit at a time, at least 25% of the total price of the commodities. This amount can also be deposited in installments. Special Deposit Schemes + Investment Deposit Scheme for entrepreneur: Banks often provide loan facilities for the businessman to purchase necessary equipment for business if certain amount of deposit is accumulated in the account of the loan applicant. For Example, under the scheme 25% of the expected loan money is deposited in the account as balance of loan applicant.Special Deposit Schemes * Farmers’ Investment Deposit Scheme: Banks provide loan facilities to farmers to purchase useful farming equipments. To get the loan opening deposit account is a condition. * Deposits Linked to House Loans: Banks also provide loan facilities to the small and medium income people for building home. To avail this types of loan facilities, the client is required to deposit a certain amount monthly for some years and then bank will extend house loan. Special Deposit Schemes * Deposited Linked to Old Aged Provision: The non- government officials who are out of pension facilities may avail this loan facility. Under this scheme, the depositors are required to deposit a sprcific amount of money and will receive a certain amount monthly after maturity of the same. The maturity and rate of interest vary from bank to bank. The duration of this type of type of scheme if generally for 5 to 10 years depending on the size of the deposit.Special Deposit Schemes * Investment Facilitating deposit Scheme: Generally, selection of portfolio and investment decision are complex issues. Investor keeps deposit in the bank as investment. Time to time, bank purchases or sell shares/securities according to its best judgment. Banks collects a small amount as brokerage fee from these depositors. Not all the deposits are always invested. More or less, some amount is always kept idle in the bank account. Special Deposit Schemes Deposit With Insurance benefit: Under this scheme, bank promises to provide insurance benefit. The depositor is required to pay the monthly installments (TK. 100, TK.500, TK. 1000 etc.) for at least 10 years or so. After depositing the money, the depositor will get his/her money back along with interest. But depositors deposit the installments for at least 5 years and then for the specific accident failed to make deposit any longer, the depositor will get his/her money back along with interest and stipulated amount for insurance.Special Deposit Schemes * Monthly Benefit Scheme: Under such scheme, depositors need to keep a large amount at a time for a fixed period (5 to 10). After depositing the money, the depositor will continue to receive the specific profit in each month till the maturity. At the end of the maturity, the depositor will receive the principal amount. This will increase the time deposit of the bank. Special Deposit Schemes * Monthly saving Scheme; Depositors keep a specific mount (TK.100, TK.200, TK.500) in each month for specific maturity (5, 10 or 15 years). At the end of the maturity, the deposited amount , along with the profit, it returned to the depositor. If the depositor can not continue up to the full maturity, the amount deposited over the period will be returned with less than stated rate of profit.Special Deposit Schemes * Special Saving Scheme: Under such scheme, depositors keep large amount of savings for a fixed period (5,10,15 years). Bank will provide double, triple or quadruple of deposited amount to the depositors. Bank may fix the minimum amount. Special Deposit Schemes * Education Savings Scheme: This scheme is innovated for supporting education expense of children. This scheme cn be of monthly basis or the whole amount can be deposited at a time. At the end of the period, the depositor or his/her nominee can withdraw a certain amount monthly up to a certain number of years.Special Deposit Schemes Hajj Scheme: This scheme helps the religious Muslims who are interested to attend Hal, Bank collects monthly installment for 1,2,3....20 years and returns the deposit with profit at the end of the term. Some banks having such schemes also collect the tickets and perform other formalities on behalf of the clients. If the expenses of the bank on Hajj purpose is lower than the deposit amount, the bank will return the balance. Again if the expense becomes greater, bank will ask the depositor to make additional money to cover up the shortage. Assignments 1. Commercial bank. Characteristics of commercial bank. Functions of commercial bank. 2. Central bank, Importance of central bank, Functions of central bank 3. Specialized bank, Necessity of specialized banks in Bangladesh, Specialized financial institution in Bangladesh, Role of Grameen Bank in economic development as a specialized bank, Reasons for default loans in specialized bank and financial institutions in Bangladesh