COST OF FUNDS

FD
SD RD BD
CD
Approx. interest
rates in %
0 1 2 3 4 5 6 7 8 9 10 11 12

TIME LIABILITIES DEMAND LIABILITIES

 Fixed deposits  Major portion of savings account

 Recurring deposits deposits
 Cash certificates  Current account deposits
 Time liabilities portion of savings bank  Demand drafts
deposits  Unclaimed deposits
 Staff security deposits
 COST OF FUNDS
FD
BD
3. FIXED DEPOSIT ACCOUNTS CD SD RD

(TERM DEPOSITS) Approx. interest

rates in %
0 1 2 3 4 5 6 7 8 9 10 11 12

Salient features
 Can be operated for a tenure ranging from 7 days to 10 years
 Not payable on demand and do not enjoy cheque facility
 Interest rates increases with the time period
 Approx. 4.5% for 7 day period to 9% for 10 year period
 Interest rates will be slightly higher for senior citizens (60 + years of age)
 Premature withdrawal of the deposits is possible, but it attracts penalty at the rates varying from
0.5% to 1.5%
 If the deposits are Rs 1 crore or more, they come under the bulk deposits and interest rates may
vary further
 Interest will be paid at the contracted rate for the agreed period
 COST OF FUNDS
FD
BD
3. FIXED DEPOSIT ACCOUNTS CD SD RD

(TERM DEPOSITS) Approx. interest

rates in %
0 1 2 3 4 5 6 7 8 9 10 11 12
… Contd
Salient features

 Loan facility is available up to 90% of the outstanding principal and accrued interest, generally
 Interest is taxable (No exemption) and nomination facility is available
 Moreover, Tax Deduction at Source (TDS) will be ensured by the bank, if the interest income is
more than Rs.10,000/- in a financial year
 Once the tax is deducted, banks will give form no. 16 A to the depositor to show in their IT returns
 If the depositor does not come in to the bracket of Income Tax purview, he can deposit form no.
15G or 15H (for senior citizens) so as to avoid ‘TDS’ by banks
 Quoting PAN is made mandatory for FD’s of Rs. 50,000/- and above
 COST OF FUNDS
FD
SD RD BD
CD
4. RECURRING DEPOSITS Approx. interest
rates in %

Salient features 0 1 2 3 4 5 6 7 8 9 10 11 12

 Most of the features are like fixed deposits

 It is a monthly deposit with the bank for an agreed period
 Interest is credited on the accumulated balance at regular intervals
 These are designed to induce small savers to save regularly
 Minimum period and minimum monthly deposit varies from bank to bank
 Maximum period is normally 120 months (10 years)
 Loan / overdraft facility is available up to 90% against the balance in RD account
 Nomination facility is available
 Interest is taxable, TDS is also applicable, as per the Budget 2015-16
 Penalty for premature closure
 COST OF FUNDS
FD
SD RD BD
CD

5. BULK DEPOSITS Approx. interest

rates in %
0 1 2 3 4 5 6 7 8 9 10 11 12

Salient features
 Deposits of Rs 1 crore and above constitute bulk deposits
 Interest rates vary based on the quantum of deposit
 High interest rates, so the cost of funds is high
 Normally these deposits are obtained from High Net-worth Individuals (HNIs)
 Present limit of bulk deposits is 15% of their total deposits as it will increase cost of funds. But,
banks are not following these guidelines strictly

In a nut shell, these bulk deposits will be helpful to the banks to maintain asset liability ratio, but it
will increase the cost of funds.