Demand Deposits

Current AccountsCurrent accounts form a large porhon of demand deposits of a bank. Current accounts can be opened by individuals, business entities (firms, company), institutions, government bodies/departments, societies, liquidators, receivers, trusts, etc. The main features of current accounts are

• There are no restrictions on khe number and amount of withdrawals/deposits. Hence this account is maintained for the purpose of business.

• Cheque book facility is provided to each current account holder. Withdrawals are permitted by cheques. There is no restriction on the number of cheques that can be transacted in a day.

• Balance of deposit in the current accounts do not earn any interest. Banks are not allowed to pay interest or brokerage, in any form, to the current account holders.

• Customers are allowed overdraft facility. Overdraft is a facility whereby banks honour cheques drawn by current account customers even when the balance in the account is less than the amount of the cheques. Banks charge an agreed rate of interest on such overdrafts. Overdraft can be temporary or regular. Banks can sanction regular Overdraft (permanent) facility as per prior arrangement made by the account holder with the bank. In such cases, the bank would honour cheques drawn in excess of the credit balance but not exceeding the overdraft limit. The bank would charge agreed interest on the overdraft amount.

• The account holder gets periodical statements of accounts from the bank, giving the details of transactions, for customer’s verification and record. The statement of account would show, date-wise, the entire debit and credit transactions and balances, as recorded in the bank’s ledger account of the customer.