Demand deposits are Peculiarities of demand deposits

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

Demand deposits are instruments that enable customers to use the finances placed on them at any time according to their requirement. Their main advantage is high liquidity along with the possibility of their use as a means of payment. The disadvantage is a rather low percentage in comparison with urgent counterparts.

Features of demand deposits

The main features are the following circumstances:

• Funds may be partially or fully withdrawn at any time.
• Funds can be debited in cash and non-cash form.
• For such deposits, financial institutions are required to maintain a certain level of reserve in the Central Bank.

These features determine the procedure for using funds along with the calculation of interest on the corresponding type of deposits. In practice, interest on demand deposits is chargeddaily to the balance of finances on the account, which is fixed at the close of the banking day. This means that if during the day the client deposited one hundred US dollars, and then withdrew two hundred, then interest will be charged on the amount that will be on the account at the close of the transaction day. Capitalization of interest on a demand deposit is carried out according to the agreement, as a rule, once a month.

Opening a demand deposit

Like others, demand deposits are accounts that are opened by a bank on the basis of an agreement, which is drawn up in two copies. For individuals, a passport is enough with an expression of desire that the deposit be launched and begin its work. If the client does not have a bank card, social payments can be transferred to him along with scholarships and even a salary.

Package of papers for legal entities

Legal entities can also place their temporarily free funds on a demand deposit, however, the opening procedure will provide for the provision of the following package of documents:

• Charter of the enterprise.
• Application for opening an account.
• Card with sample signatures of persons en titled to apply to the bank for withdrawal of funds.

It is worth noting that a demand deposit is a convenient, and at the same time, a reliable way to store free money that a person may need at any moment, but it is not appropriate as part of a profitable and savings deposit,since the interest rate is very low.

Types of deposits

Demand deposits are accounts that customers open in order to freely receive and spend funds that are held in the bank to settle transactions and to pay for everyday expenses. They are generally classified according to the ownership and nature of the funds held by the financial institution.

• Money in the current, settlement and budget accounts of enterprises of various forms of ownership.
• Own funds of companies that are intended for capital investment.
• Money in settlements and credit balances on correspondent payment instruments.
• Local budget finances.
• Credit balances in correspondent bank accounts.

Enterprises pay their expenses related to settlements with contractors, suppliers, the budget and various funds, they withdraw money to pay salaries to employees, and make other necessary payments. Now consider the issue of rates.

Interest rates for demand deposits

Now let's consider the issue of interest on the same type of deposits in different banks, and also find out the size of demand rates that threaten in case of early closure of deposits.

Name	Sberbank deposit	VTB-24
Interest on urgent standarddeposit when placed for one year	7, 5% on the "Save Online" deposit.	7, 8% on the Profitable deposit with capitalization
Demand interest	0, 001% per annum is accrued on deposits that are opened in rubles and currency	0, 001% per annum is accrued on deposits that are opened in rubles and currency

So, as you can see from the table, there are differences in the rate on time deposits in Sberbank and VTB, while the percentage of demand deposits is fixed. True, there are structures that offer very favorable rates of five and even seven percent per annum, but the question of whether it is safe to store funds in them is another topic for discussion. Institutions that offer higher rates include Mosstroyekonombank, IntechBank and others.

Deposit accounts of individuals

Demand deposits are accounts that individuals (that is, ordinary citizens) can open.

Any deposits are conventionally divided into two large groups: on demand and urgent. The second group is distinguished by a longer shelf life, usually from a year or more. In the case of drawing up an agreement for such a deposit, it will be quite problematic for the client to withdraw funds ahead of time. The demand deposit is offered at the lowest interest rate, as partial or full withdrawals are available at any timepossible.

It is worth noting that deposits are a popular and widespread financial service among residents of most states. The main mistake that depositors often make is to conclude an agreement with new and far from the most reliable banks in the country.

What other types of demand deposits are there?

Institutional accounts

Legal entities also often make deposits of fairly large amounts in order to receive passive income in the form of accrued interest. Usually, various companies and enterprises place funds released for a certain period in commercial banks.

Most of the offers of banks, which are addressed to legal entities, are time deposits for specific periods with fixed interest rates. Such deposits may be irrevocable or revocable, depending on the desire or lack of such by the management of the depositor company to claim the invested amount ahead of time.

Deposit account operations

The concept of "deposit operations" should be understood as the actions of financial institutions that are aimed at raising funds from legal entities and individuals acting as potential bank customers who open time deposits on demand. It is noteworthy that absolutely any enterprise can act as the subject of such an operation, which does not depend on the organizational and legal form, and, in addition,individual.

The object of the deposit operation is the funds that are deposited into the bank account. As a rule, such operations are carried out within the framework of tasks, forms, as well as the stage of planning and regulation of banking activities, which are established in advance. Now let's talk about demand deposits for individuals with Sberbank.

Sberbank accounts

The interest rate on deposits in this financial institution is not the highest in the country, but the level of trust in the institution in question is one of the highest. Despite the bank's good rating, only deposits of up to seven hundred thousand rubles are under state protection. For these reasons, bankers use a higher rate to attract customers with the most profitable deposits.

Sberbank has absolutely everything in order with the range of monetary services. As a rule, placement of free funds is available not only in rubles, but also in other generally accepted currencies (euro or dollars), and, in addition, in pounds sterling, Swiss francs, Canadian dollars and Japanese yens. Optionally, clients choose additional options in the form of demand withdrawal options. In addition, partial withdrawals or maximization of the overall rate of return are quite possible.