Concept of Bank Deposit | Purposes and Importance of Bank Deposits

Concept of Bank Deposit

Deposit is the main source of banking business. Deposit can be collected in many ways. In particular, commercial banks collect deposit through opening different bank accounts on the basis of needs of the clients and organization.

Generally, commercial banks collect deposit through current, savings and fixed accounts and then utilize it effectively.

Purposes and Importance of Bank Deposits

Importance of bank deposit or bank account has completely different significance from the client's or depositor's and bank's perspective. Again, in micro-economics bank deposits play some important roles. These are briefly demonstrated below purposes of bank deposit:

For Clients

1) Security of money

2) Business transaction 

3) Loan facility

4) Risk-free investment

5) Availing service

6) Meeting demand of excess fund

For the Bank

1) Receiving deposit

2) Investment

3) Foreign Exchange

Role in Micro-Economics

1) Creating a habit of saving

2) Building capital

3) Investment and production

4) International trade

For Clients

1) Security of Money: One of the main purposes of bank is to ensure security of surplus money of the clients

2) Business Transaction: Banks make business transaction through cash or other banking products, such as cheques, bills of exchange, bank draft etc.

3) Loan Facility: Banks offer loans to its current or savings account holders if needed. To receive this facility its necessary to open a bank account.

4) Risk-free Investment: Banks offer interests in certain rates to its depositors. It does not involve any risk like making an investment in the share market. Therefore it is a risk-free investment.

5) Availing Services: Banks offer various welfare activities to clients for opening a bank account and this attracts people to preserve bank accounts.

6) Meeting Demand of Excess Fund: Banks allow their clients to overdraft so that they become attracted to deposit money.

For the Bank

1) Collecting Deposit: Banks accept the savings of people as deposits through various accounts and create their fund.

2) Investment: Banks invest the money collected from their clients in various profitable sectors. So it is major objective of banks to ensure profitable investment.

3) Foreign Exchange: Banks also do business of foreign exchange, where sometimes the clients need to open bank accounts to receive the facilities offered by the banks.

In National Economic Development

1) Forming a Habit of Saving: People form a habit of saving by opening bank accounts.

2) Creating Capital: Idle savings of people accumulate through bank account and create capital.

3) Investment and Production: Investment increases because of bank accounts which play important role in a country's production and economic growth.

4) Employment Generation: New employments are created due to enhanced economic activities facilitated by investment through bank accounts.

5) International Trade: Banks participate in export-import business through their clients' accounts and increase international trade.

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