Deposits – General Guidelines
One of the important functions of the Banks is to accept deposits from the public for the purpose of lending. In fact, depositors are the major stakeholders of the Banking System. The depositors and their interests form the key area of the regulatory framework for banking in India and Reserve Bank of India has been issuing broad guidelines to the banks from time to time. Various deposit products offered by the Bank are assigned different names. The deposit products are categorized broadly into the following types.
- “Demand Deposits” means a deposit received by the Bank, which is withdrawable on demand;
- “Current Deposit” means a form of demand deposit wherefrom withdrawals are allowed any number of times depending upon the balance in the account or up to a particular agreed amount. These accounts are meant purely to meet the business needs of customers. Hence, no interest is paid on balances in Current accounts. RBI prohibits banks from paying interest in Current accounts. While opening of current accounts for business entities, banks should make reference to CIBIL to ensure that the entity does not have borrowing arrangement and it is not on the list of defaulters. In either case a reference should be made to the lending banks before the current account is opened to ensure credit discipline among the borrowers.
- “Savings Deposits” means a form of demand deposit which is subject to restrictions as to the number of withdrawals as also the amounts of withdrawals permitted by the Bank during any specified period. Banks have discretion to introduce special schemes with insurance coverage and other benefits to the specified group of customers with or without additional charges depending on the scheme terms and conditions.
- “Term Deposit” means a deposit received by the Bank for a fixed period withdrawable only after expiry of the fixed period and includes deposits such as Recurring / Cumulative / Annuity / Reinvestment deposits / Cash Certificates, etc. The minimum period of Term Deposit is 15 days. However, branches can accept term deposit for 7 days also provided the amount of deposit should be Rs.1 lakh & above. The maximum period should not exceed 10 years except in case court/minor deposits as special case.
- ”Notice Deposit” means term deposit for specific period but withdrawable on giving at least one complete banking day’s notice;
Bank may, from time to time design/come out with new deposit products, with certain additional benefits with or without payment of certain charges to cater to needs of specified categories of depositors and the same may not be made available to other customers.
Joint Account – Deposit accounts can be opened by an individual in his own name or by more than one individual known as Joint Account. The account can be operated by single individual or by more than one individual jointly as per the mandate. The mandate for operations can be viz., Individual; or Jointly; or Either or Survivor; or Former or Survivor; or Any one or Survivor. If the account is held by two individuals – Either or Survivor, the final balance with interest, if applicable, will be paid to survivor on death of anyone of the account holders. If the account is held on former or survivor basis, the final balance along with interest, if applicable, will be paid to survivor on the death of Former. The bank may at the request of all the joint account holders allow addition or deletion of name/s of joint account holder/s if the circumstances so warrant or allow an individual depositor to add the name of another person as a joint account holder. However the name of the first joint account holder cannot be replaced.
Accounts of Firms / Companies / Trusts / Associations, etc – The above constituents can open domestic deposit accounts i.e. current, term deposits by producing necessary documents as specified in the application. All the members of the organization like partners, directors, trustees, etc. are subject to compliance of KYC norms. Only certain types of institutions are eligible to open Savings accounts. Branches should adhere to the following guidelines while opening of Government / Quasi Government / Public Sector Undertakings / Other Institutional Accounts.
- Obtain Government order or notification authorizing the concerned officer to open and operate the account
- Verify the identity of the officer authorized to operate the account
- Obtain photographs of the persons authorized to operate the account
- Address letter to next higher authority after opening of the account
- Not to make payment of maturity proceeds of term deposits in cash
- Obtain balance confirmation letter for operative and term deposits every quarter from the said accounts
Minors’ Accounts – Savings Bank/Recurring Deposit Account can also be opened by a minor jointly with natural guardian or with mother as the guardian. Minors above the age of 10 will also be allowed to open and operate saving bank account independently. However, no overdrafts will be granted to these minors. On attaining majority, the erstwhile minor should confirm the balance in his / her account and if the account is operated by the natural guardian / guardian, fresh specimen signature of erstwhile minor duly verified by the natural guardian would be obtained and kept on record for all operational purposes.
Illiterate Accounts – The Bank may at its discretion open deposit accounts in the name of illiterate individuals. However, opening of Current Deposit Account requires prior permission from higher authorities. While opening of the account, the depositor needs to call on the Bank personally along with a witness who is known to both the depositor and the Bank. The Bank official shall explain the terms and conditions governing the account including safe keeping of Passbook, Cheque Book, Debit Card etc., to the illiterate person. At the time of withdrawal/repayment of deposit amount and/or interest, the account holder should affix thumb impression in the presence of the authorized officer who should verify the identity of the person.
Visually Impaired Persons – Visually Impaired Persons may be allowed to open all types of deposit accounts, except current accounts, either singly or jointly with other persons. Opening of Current Accounts for visually impaired persons at the branch level requires prior permission from higher authorities. The terms and conditions governing the accounts including special conditions, if any, should be read and explained to the visually impaired person by the bank official in the presence of a witness in view of his physical infirmity. Branch should obtain witness signature (known to the bank) on Personal Data Form and the Account Opening Form along with specimen signature of the depositor at the time of opening of the account.
Basic Savings Bank Deposit Account - With a view to achieving greater financial inclusion, RBI directed the banks to make available basic banking services to the needy people with Nil balance account without any service charges. However, the restrictions on transactions and amount are to be made known to the depositors transparently. In order to ensure that persons belonging to low income group both in urban and rural areas do not face difficulty in opening the bank accounts due to the procedural hassles, the ‘KYC’ procedure for opening accounts for those persons who intend to keep balances not exceeding Rs.50000/- in all their accounts taken together and the total credit in all the accounts taken together is not expected to exceed Rs.100000/- in a year has been simplified to enable those belonging to low income groups without documents of identity and proof of residence to open banks accounts.
However, these accounts need to be introduced by the existing KYC compliant customer who had satisfactory dealings with the bank for at least six months. Photograph of the customer who proposes to open the account and his address need to be certified by the introducer. It is also known as No Frills Accounts.
Pension Accounts are opened on receipt of advice from pension disbursing authorities with all the relevant documents sent to the Bank at identified places / branches. Payment of pension will be made as directed by the pension disbursing authority. The terms and conditions for opening of accounts in the name of pensioners are available at these selected branches of the Bank. The other terms and conditions will be informed by the Bank from time to time.
Senior Citizens: Senior citizens who have completed 60 years of age and residing in India are given certain privileges such as 0.50% additional interest rate over and above the card rate. The depositor is required to furnish Proof of age to the bank. Joint accounts with another senior citizen or with person who is not a senior citizen is permitted. In the latter case, only if the senior citizen is the first named depositor, the privileges are applicable.
Staff Accounts – Banks can offer additional interest of 1% on the deposits placed by the staff members either working or retired subject to conditions laid down by the respective banks. The spouse of the deceased also can also avail this facility. In case of Joint accounts, the first name in the deposit should be the staff or ex-staff or spouse of the staff. However, staff rate of interest is not applicable for NRE/NRO/FCNR deposits.
Mandate – At the request of the depositor, the Bank register mandate/power of attorney authorizing another person to operate the account on his behalf.
Interest on Term Deposits – The interest shall be calculated at quarterly rests on term deposits. However, banks are allowed to pay monthly interest at discounted value. For the purpose of calculation of interest on domestic term deposits repayable in less than three months or where the terminal quarter is incomplete, interest should be paid proportionately for the actual number of days reckoning at 366 days in a leap year and 365 days in other years. Whenever interest rates are revised, the revised rates are applicable to fresh deposits as well as renewed deposits. The interest rates offered are non-discretionary and non-discriminatory and are applicable uniformly to all depositors at all branches of the Bank. The rate of interest on deposits should be prominently displayed in the branch premises and Bank’s website. Government of India advised the Banks not to pay any preferential interest on the deposits of Central Public Sector Enterprises.
Premature Renewal of Term Deposit – In case the depositor desires to renew the deposit by seeking premature closure of an existing term deposit account, the bank will permit the renewal at the applicable rate on the date of renewal, provided the deposit is renewed for a period longer than the balance period of the original deposit. While prematurely closing a deposit for the purpose of renewal, interest on the deposit for the period it has remained with the bank will be paid at the rate applicable to the period for which the deposit remained with the bank reckoning from the date of deposit and not at the contracted rate. Banks are allowed to open Pension account jointly with spouse. In case pensioner expires, the spouse can continue the same account for family pension/other pension benefits.
Premature withdrawal of Term Deposit – The Bank on request from the depositor, at its discretion may allow withdrawal of term deposit before completion of the period of the deposit agreed upon at the time of placing the deposit. The Bank shall declare its policy on penalty which will be levied by way of interest reduction for premature withdrawal of term deposit. The Bank shall make depositors aware of the applicable rate along with the deposit rate. Normally, the premature cancellation of term deposit attracts a penalty of 1%. However, at present, deposits of Individuals up to Rs. 5 lakh contracted for any maturity period and deposits of Govt / Corporates / firms / institutions / associations etc up to Rs.100 lakh contracted up to 90 days are exempted from levying penalty. (Cir no.292 Ref 27/27 dated 17.10.2012)
Overdue Term Deposits – Payment of Interest – Overdue deposits will be renewed with effect from the date of maturity at interest rate applicable as on the due date, provided such request is received within 14 days from the date of maturity. Where the overdue period exceeds 14 days and where the deposit or part thereof is renewed, the rate of interest payable on the deposit so renewed shall be the lower of i) the rate of interest applicable for the renewed period prevailing on the date of maturity or ii) the rate of interest applicable for the renewed period and prevailing on the date of renewal (Cir.no.97 Ref 44/6 dated 30.05.2005). In case where the depositor is not interested to renew the overdue deposit and would like to withdraw the amount, in such cases, the depositor is eligible for applicable Savings Bank interest for the overdue period.
Tax Deduction at Source (TDS) – The Bank has statutory obligation to deduct tax at source (at present 10%) if the total interest paid/payable on all term deposits held by Resident person exceeds the amount specified, presently Rs.10000 in a financial year under the Income Tax Act. However, TDS is exempted to the individual depositors who submits 15G (whose age is below 60 years) and 15H (whose age is above 60 years) stating that their total income from all sources including the interest on bank deposits is well within the taxable income limit. Branch should obtain 15G/15H in triplicate and return one copy to the customer as acknowledgement and it should bear round seal of the branch. As per extant Income Tax guidelines, all depositors invariably submit PAN failing which the interest income on such term deposits attracts TDS @20% with effective from 01.04.2010. It is the responsibility of the branches to download Form 16A from TIN website and also generate single interest certificate for a customer. Branches should ensure that TDS certificate (Form 16A) as well as Interest certificate should be sent to the depositor without waiting for or seeking any written request from the depositor. The Bank will issue a tax deduction certificate for the amount of tax deducted. Further, if any depositor requests for TDS certificate, the same should be issued again even though the TDS certificate was already issued. Interest received on NRE/FCNR/Recurring deposits, irrespective of amount is exempted from TDS.
Inoperative / Dormant Accounts: Savings as well as Current account should be treated as Inoperative / Dormant if there are no transactions in the account for over a period of two years. For the purpose of classifying as above, both the type of transactions (Debit/Credit) induced at the instance of customers as well as third party should be considered. However, charges levied or interest credited should not be treated as transaction for the said purpose. Operations in such accounts may be allowed after due diligence i.e. ensuring genuineness of the transaction, identify verification and signature verification. Before converting the account in to Inoperative, notice is to be issued to the depositor. The conversion may be postponed to another one year, in case depositor requests in writing that he undertakes to route the transactions in to the account.
Unclaimed Deposits: Accounts (CA/SB) where there are no customer transactions for the last 10 years are treated as unclaimed deposits. With regard to term deposits, which remained unpaid even after 10 years of maturity are treated as unclaimed deposits. As per Banking Regulation Act 1969, Branches to submit details of unclaimed deposits to Head Office on 31st Dec of every year for onward submission to RBI. In case of deceased accounts, the claim shall be settled in favour of the nominee where the nomination is available and where there is no nomination, claim settlement shall be as per applicable norms. Banks are required to disclose the list of unclaimed and inoperative deposit account holders, in a bid to help the claimants trace their deposits and the names of the depositors shall be displayed on the Website. The list of unclaimed deposits shall be updated on a monthly basis.
Frozen Accounts – With regard to the savings bank accounts frozen by the enforcement authorities, Bank will continue to credit the interest to the account on a regular basis. However, withdrawal/debits can be allowed only when the accounts are released by the Enforcement Authorities. In the case of Term Deposit Accounts of Customers frozen by the orders of the enforcement authorities, Banks are required to obtain a request letter from the customer for renewal for a term equal to the original term, on maturity. No new receipt will be issued. However, suitable note will be made regarding renewal in the deposit ledger. Renewal of deposit shall be advised by registered letter / speed post / courier service to the concerned Govt. department under advice to the depositor. In the advice to the depositor, the rate of interest at which the deposit is renewed will also be mentioned. If overdue period does not exceed 14 days on the date of receipt of the request letter, renewal shall be done from the date of maturity. If it exceeds 14 days, interest for the overdue period shall be paid as per Bank’s extant guidelines that are referred in this policy.
Nomination facility: As per section 45 ZA to 45 ZF of the Banking Regulation Act, 1949, account holder can nominate any individual of his choice as nominee to receive money from the bank in case of death of the depositor. Nomination facility is available to all types of deposit accounts (including joint accounts E or S), safe deposit lockers and safe custody articles, which are in the name of individuals. The nominee can be any individual including illiterates, minors. However, nominations cannot be made in favour of joint names / Bodies (institutions / trusts etc). The only exception is safe deposit lockers hired jointly; there can be more than one person as nominee. In case of illiterate account holders, branch to obtain two witnesses while accepting nomination. Consent of nominee is not mandatory. Nomination made in respect of a term deposit will continue to be in force even on renewal of such deposit unless the nomination is specifically cancelled or changed. The customer has option to change nomination any number of times during the currency of the deposit. The rights of nominee arise only after the death of the depositor. As per the recent guidelines, the name of the nominee is to be printed on the Passbook / Term Deposit Receipt at the specific request of the depositor. Branch should take witness of Magistrate / Judicial Officer or an Officer of Central Govt. or State Government or an Officer of a Bank or two persons acceptable to the Bank for settlement of claims under nomination.
Passbook/Account Statement – The Bank will provide either a statement of account or a Pass Book to Savings Bank as well as Current Deposit Account Holders periodically as per terms and conditions of opening of the account. However, in case a customer holds a pass book and still requests for a statement of account and vice versa, the same will not be denied and will be provided on payment of charges as specified by the Bank from time to time.
Transfer of Accounts – The deposit accounts may be transferred to any other branch of the Bank at the request of the depositor subject to fulfillment of KYC norms at transferee branch. However, if any deposit scheme is devised with a precondition that it cannot be transferred to other places/ branches, the account will continue to be maintained at the branch where it is opened. Standing Instructions – Standing instructions can be given to the Bank for transfer/remittance of funds from one account to other account(s) maintained in the same branch, or any other branch of the bank or any other bank or any other third party. Applicable charges will be levied by the bank for rendering the said services. Revision in service charges, if any, will be communicated one month in advance to the customers before effecting the revision, through Bank’s website.
Deposits maturing on a holiday – In respect of a term deposit maturing for payment on a Sunday or a holiday or a non-business working day, bank would pay interest at the originally contracted rate on the deposit amount for the Sunday / holiday / non-business working day also, intervening between the date of the expiry of the specified term of the deposit and the date of payment of the proceeds of the deposit on the succeeding working day. Form 60/61 – It is the declaration by the customer who deposit high value cash (Rs.50000 & above) and who do not have PAN Card. Form-60 is meant for general public declaring that he is not a income tax assessee and Form-61 is for the persons who have agriculture income.
Payment of Term deposits by cash – Section 269 of Income Tax Act, 1961 prohibits payment of term deposits or notice deposits in cash if the amount involved, principal plus interest is Rs.20,000/- or more. Hence, the payment of such deposits is to be made by way of credit to the account of the party (or) by way of A/c Payee crossed demand draft or pay order only.
Advances against Deposits – The Bank may consider request of the depositor/s for loan / overdraft facility against term deposits duly discharged by the depositor/s on execution of necessary security documents. Whenever loan is granted, a lien on the deposit is marked and bank shall have the right to appropriate the deposit proceeds to the loan account on the date of maturity, in case the loan remains unpaid. The interest rates applicable, margins to be maintained etc. will be made known to the customers at the time of availing the Deposit Loan and also will be placed in Bank’s website from time to time.
Insurance Cover for Deposits – All bank deposits are covered under the insurance scheme offered by Deposit Insurance and Credit Guarantee Corporation of India (DICGC) subject to certain limits and conditions. At present, the insurance premium is being paid by the Bank. Each depositor in a Bank is insured up to a maximum of Rs.100000/- for both principal and interest amount held by him in the same capacity and same right as on the date of liquidation/cancellation of bank's licence or the date on which the scheme of amalgamation/merger/reconstruction comes into force.
Rounding-off transactions: All transactions including payment of interest on deposits will be rounded off to the nearest rupee; i.e., fractions of fifty paise and above shall be rounded off to the next higher rupee and fraction of less than fifty paise shall be ignored.
Settlement of Deceased Deposit account – In case where the depositor exercised nomination, the balance outstanding in the account of the deceased depositor will be transferred to the account of/paid to the nominee after the Bank is satisfied about the identity of the nominee. In a joint deposit account, when one of the joint account holders dies, the Bank is required to make payment jointly to the legal heirs of the deceased person and the surviving depositor(s). However, if the joint account holders had given mandate for disposal of the balance in the account in the forms such as ‘either or survivor, former / latter or survivor, anyone of survivors or survivor’, etc., the payment will be made as per the mandate to avoid delays in production of legal papers by the legal heirs of the deceased. In the absence of nomination and when there are no disputes among the claimants, the Bank will pay the amount outstanding in the account of deceased person against joint application and indemnity by all legal heirs or the person mandated by the legal heirs to receive the payment on their behalf without insisting on legal documents up to the limit approved by the bank’s board. This is to ensure that the depositors are not put to hardship on account of delays in completing legal formalities.
Interest payable on term deposit in deceased account – In the event of death of the depositor before the date of maturity of deposit and amount of the deposit is claimed after the date of maturity, the Bank shall pay interest at the contracted rate till the date of maturity. Again from the date of maturity to the date of payment, the Bank shall pay simple interest at the applicable rate prevailing on the date of maturity, for the period for which the deposit remained with the Bank beyond the date of maturity, as per the Bank’s policy in this regard. However, in the case of death of the depositor after the date of maturity of the deposit, the bank shall pay interest at savings bank rate operative on the date of maturity (at present 4.00% p.a.) from the date of maturity till the date of payment. In the case of balances lying in current account standing in the name of a deceased individual depositor/sole proprietorship concern, interest shall be paid only from 1st May, 1983, or from the date of death of the depositor, whichever is later, till the date of repayment to the claimant/s at the rate of interest applicable to savings deposit as on the date of payment.
Service Charges – The terms and conditions for opening a deposit account and the charges that will be levied on the account will be provided to the customer at the time of opening of the account. The revised charges, if any, are to be informed to the customers well in advance either through press releases or advertisement in print media and or by displaying in Bank’s web site.
Customer information & Secrecy – The information collected from the customers shall not be used for cross selling of services or products by the Bank, their subsidiaries and affiliates. If the Bank proposes to use such information, it will be strictly with the consent of the account holder. Bank should prepare a profile for each customer based on risk categorization. This profile contains the information relating to customer’s identity, social/financial status, nature of business activity etc. The customer profile is a confidential document and details contained therein will not be divulged for cross selling or for any other purposes. The Bank shall not disclose details / particulars of the customer’s account to a third person or party without the express or implied consent from the customer. However, there are some exceptions, viz. disclosure of information when the interest of our Nation is at stake and compulsion of law, where there is a duty to public to disclose and where interest of the Bank requires disclosure.
Redressal of complaints and grievances – Depositors having any complaint / grievance with regard to services rendered by the Bank have a right to approach authorities designated by the Bank for handling customer complaint / grievances. The details of the internal set up for redressal of complaints / grievances will be displayed in the branch premises. The branch officials shall provide all required information regarding procedure for lodging the complaint. In case the depositor does not get response from the Bank within one month from the date of complaint or he is not satisfied with the response received from the Bank, he has a right to approach Banking Ombudsman appointed by the Reserve Bank of India.
Term Deposits – Purchase of Cheques/Drafts: Hitherto, Banks were permitted to purchase cheques/drafts at par provided the entire proceeds are placed as Term Deposits for a minimum period of 6 months. Now, RBI has advised all Banks to stop the purchase of cheques/drafts at par for placing the proceeds as Term Deposits with effect from 27.01.2014. (Cir.no.430 Ref 27/47 dated 25.01.2014)