Demand deposit is a category of bank fund that is deposited by the customer. Unlike other bank funds the major difference is that customer can withdraw money at any time they want. The main purpose of this account is to meet the immediate cash requirements of the depositor. This money is the major source of cash flow in the banks.
Demand deposits can be divided into two classes
- Savings account- In this account the customer can deposit money at will and can also withdraw at will. But the number of transactions are restricted in this account. An annual interest is also provided for the deposited money. But the interest rate will be much lower than fixed deposits.
- Current account- This account is mainly meant for business purposes, where there are numerous transactions in a day. Any number of withdrawal can be made from this account. Usually daily cash requirements are met through current account. Money can be withdrawn using a debit slip, cheque, ATM card, Bank card etc.
Characteristic of Demand Deposit
- Anytime fund availability is the highlight of demand deposit
- There is no maturity period for the funds to be withdrawn
- There are no limit on transaction number. User can make any number of withdrawals any time. (only for current account)
- No prior notice is needed in order to withdraw cash. Since the banks keep demand deposit money as immediate funds, which are easy to withdraw.
- Interest rates are comparably low. Usually 2.5 – 4% are standard interest rate for saving account but it can vary with banks .(only for savings account)
- Demand Deposit is accessible anytime with ATM, cheque, internet banking etc.
