Banking business thrives on deposits from customers. Customers deposit their hard earned money in banks such as IDFC FIRST Bank to earn an income in the form of interest. Banks use these deposits to lend money to various classes of people who require funds for a variety of reasons for which they charge interest to these borrowers which is typically higher than what they pay to customers for deposits. Thus, banks make money through this difference in the interest rate charged.
IDFC FIRST Bank also offers different types of deposit accounts. The most common types of deposits are
Customers can choose the type of account they want to open based on their needs for funds from time to time. Often, customers consider parameters such as liquidity, safety, earnings and the convenience of operating the accounts.
The various features of each account are as follows.
This is a simple account for customers to open for all their regular periodic banking transactions such as payment of utility bills, rent, daily expenses, school fees, travel expenses and incidental expenses. Typically, household customers and individuals open savings account and businesses or self-employed professionals and non-professionals open a current account. The main difference between the two is the payment of interest. While savings bank accounts earn interest for outstanding balances at a rate prescribed by the bank from time to time, current accounts don’t earn any interest.
The most common form of deposits is fixed deposit account (FD) or term deposit. As the name suggests, the ‘fixed’ or ‘term’ refers to a fixed rate of interest earned by the FD for a fixed tenure. The interest rate stays fixed for the term for which the deposit runs. The main features of a fixed deposit account includeb
The rate of interest on earnings depends on the period for which the depositor takes the FD. In general, FD with longer period earns higher interest. For instance, IDFC FIRST Bank offers 4% interest for FD of 7-14 days, 7% for FD of 181-365 days, and 7.5% for FD of 541- 730 days, 8% for FD of 731-1095 days and 8.25% for FD of 3 years and above.
IDFC FIRST Bank offers benefits for FDs based on the profile of the depositors such as
FDs help both banks and customers. While customers earn regular interest income for a fixed term, banks can rest assured that the amount stays with the bank for a fixed term, so that it can deploy the funds to extend loans to others.
While FD involves depositing a lump sum amount to earn regular interest income, recurring deposit account (RD) involves depositing a fixed amount periodically, mostly monthly. These recurring deposit accounts earn interest accumulated over the period of the deposit. At the end of the tenure, the RD holder can collect a tidy sum which includes the principal amount plus the interest earned for the period. The main features of RD are
RD is an excellent product for all kinds of people earning a regular income.
FDs and RDs serve an important benefit for people to earn interest from their deposits. For instance, if you are a salaried person earning regular monthly income, you can put aside a regular amount in RD account for a specific period and use the proceeds comprising principal plus interest earned at the end of the tenure. Even businessmen or self-employed persons can use RDs to inculcate the savings habit. On the other hand, if you come into any lump sum amount such as receiving a bonus or executing an unusually large order, you can use the bullet earnings to deposit the amount in an FD to earn interest and thereby a regular income.
Whatever your needs are, IDFC FIRST Bank offers a financial product such as an FD or RD for your benefit.