Two types of deposits accepted by a commercial bank are:
1. Fixed deposits—These deposits are accepted for a fixed period of time. The depositors cannot withdraw their money before the fixed period of time. The rate of interest is the highest on the fixed deposits. The depositors are not given a cheque book or a pass book. They are given a fixed deposit receipt which contains the details of the deposit. The depositors can even avail of the loan facility against their fixed deposit.
2. Recurring Deposit—In this deposit, a fixed amount of money has to be deposited regularly, at fixed intervals for a fixed period of time. The rate of interest is higher than savings deposit but less than the fixed deposits. The money can be withdrawn only on the maturity date. No cheque book is issued to the customer.
Two types of loans given by commercial banks:
1. Term Loans or Outright Loans—In this case, a lump sum is sanctioned to the borrower and the entire sum is credited to the current account of the borrowers. The borrower has to pay interest on the entire amount.
2. Overdraft Facility—When any account holder is allowed to withdraw a sum of money in excess of the amount deposited with the bank, it is called an overdraft facility. Here, the borrower who has received this facility, has to pay interest on the amount overdrawn.
