bank, what a bank owes. During 1960s, banking in the USA was said to operate according to the 3-6-3 rule. The most important liability category of most bank is checkable deposits, which is part of the economy's M1 money supply. The largest liability category includes other types of deposits (especially savings deposits, certificates of deposit, and money market deposits) that enter into the M2 and M3 monetary aggregates.
SAVINGS ACCOUNT Allows a customer of the bank to save a small amount of money Money can both be deposited and withdrawn from the account Withdrawal is done through cheque books or withdrawal forms ATMs have reduced the dependence on traditional withdrawal systems Savings money is invested in different avenues and the bank pays an interest on it Specially designed savings accounts for children, women etc are a new innovation by the banks
NO- FRILLS ACCOUNT A type of savings account with zero- balance or low minimum balance facility In 2005, the RBI instructed the bank to introduce such accounts so as to include the poor sections of the society in the financial system as well Allahabad Bank and UCO Bank have been providing such account facility for quite some time now
CURRENT ACCOUNT Helps the customer to perform multiple transactions in a day No interest on the amount deposited in the account Include cheque book facility, internet banking etc Used to pay rents, utility bills, insurance premiums etc FIXED DEPOSITS/TERM DEPOSITS Type of a time deposit Deposits a fixed amount for a fixed period of time Interest is paid on the money deposited at pre fixed time intervals The money can be withdrawn at maturity, but if its withdrawn before that the bank pays less interest FDs many a times also linked with safe deposit locker facility
RECURRING DEPOSITS A type of time deposit which allows the customer to save small amounts of money with bank every month Aimed at people with high expenditure in a month Modest interest paid for the amount saved, quarterly, half yearly or annually
PRICING OF LIABILITY PRODUCTS Banks free to price their liability products. Can decide on the penalties to be charged. Eg- in 2005, when there was liquidity crunch in India. Banks increased their deposit rates. Thus the net interest margins decreased. CHALLENGES
Loan Defaulters. Regulatory Compulsion. Rural markets. Post 2008:Loss in faith. THANK YOU