Deposits & Bank Accounts: Revision and Practice

How the five lessons connect#

The module forms one logical chain:

Deposits as bank liabilities
↓
Savings / current / fixed / recurring products
↓
Who owns and operates the account?
↓
Nomination, minors and survivorship
↓
How interest, maturity and premature withdrawal work
↓
How NRI deposits differ
↓
What happens if a bank fails? DICGC

The core idea is:

A deposit is not merely "money in an account". It is a legally structured bank liability with rules around access, ownership, interest, maturity, settlement and protection.

Common Confusions#

1. Demand deposit vs term deposit#

Demand deposit = withdrawable on demand.

Term deposit = fixed period.

Savings and current are demand deposits.

FD and RD are term deposits.

2. Savings vs current account#

Savings pays interest and is oriented toward personal saving/transactions.

Current account is transaction-oriented and normally non-interest-bearing.

3. FD vs RD#

FD generally starts with a lump sum.

RD grows through periodic instalments.

4. Callable vs non-callable deposit#

Callable can be prematurely withdrawn under product rules.

Non-callable cannot be prematurely withdrawn under agreed conditions.

5. Interest rate vs effective yield#

Quoted rate is not always equal to effective compounded annual return.

6. Contracted rate vs premature-withdrawal rate#

Premature closure may use the rate applicable to the actual completed tenor, less the disclosed penalty.

7. Joint holder vs nominee#

Joint holder is part of the account relationship.

Nominee is primarily relevant after death.

8. Nomination vs inheritance#

Nomination assists bank settlement.

It does not automatically override all succession rights.

9. Inoperative vs unclaimed#

Inoperative = no qualifying customer activity for prescribed period.

Unclaimed = remains unclaimed for the longer regulatory period, potentially leading to DEA Fund transfer.

10. DEA Fund transfer vs loss of money#

Transfer to DEA Fund does not extinguish the depositor's claim.

11. NRE vs NRO#

NRE = generally repatriable external/repatriable funds.

NRO = Indian income/local receipts with more restricted repatriability.

12. NRE vs FCNR(B)#

NRE is INR-denominated.

FCNR(B) is foreign-currency denominated.

13. NRO vs resident savings account#

NRO is specifically a non-resident account under FEMA.

It is not merely a normal resident savings account.

14. DICGC per account vs per bank#

₹5 lakh is not per FD, per branch or per account.

It is per depositor per insured bank in the same right/capacity.

15. Nominee vs DICGC insured person#

Nomination governs settlement.

Deposit insurance is calculated on the depositor/right/capacity.

16. Bank deposit vs investment product#

Bank FD = deposit liability.

Mutual fund/shares/bonds = investment product.

DICGC does not automatically cover the latter.

Important Exam Facts to Revise#

1. Savings account is a demand deposit.
2. Current account is a demand deposit.
3. Fixed deposit is a term deposit.
4. Recurring deposit is a form of term deposit.
5. Current accounts are normally non-interest-bearing.
6. Savings interest is calculated on a daily-product basis under RBI's framework.
7. Banks set their own deposit rates within RBI's regulatory framework.
8. Domestic term deposits have a regulatory minimum tenor.
9. Non-callable deposits do not provide premature-withdrawal facility under their terms.
10. Banks may offer differential rates on bulk deposits.
11. Deposits are liabilities for banks.
12. "Either or survivor" is a joint-account operating/survivorship mandate.
13. Nominee and joint holder are different concepts.
14. Deposit accounts can now have up to four nominees under the modern nomination framework.
15. Deposit nominations may be simultaneous or successive.
16. Simultaneous nomination requires allocation of shares/percentages totalling 100%.
17. A minor can hold savings/fixed/recurring deposits through a guardian.
18. Banks may allow eligible minors to operate savings accounts independently under their policy.
19. Inoperative accounts do not mean the customer loses ownership.
20. Deposits unclaimed for the prescribed 10-year period are transferred to the DEA Fund under the framework.
21. Transfer to DEA Fund does not extinguish the depositor's claim.
22. Premature FD withdrawal does not automatically earn the original contracted rate.
23. Banks must disclose premature-withdrawal penalty conditions.
24. A matured unpaid deposit generally earns the lower of applicable savings rate or contracted matured TD rate under the RBI rule.
25. NRE is INR-denominated and generally repatriable.
26. NRO is INR-denominated and mainly used for Indian/local income.
27. FCNR(B) is foreign-currency denominated.
28. FCNR(B) is a term-deposit scheme.
29. FCNR(B) does not permit recurring deposits.
30. NRE term deposits have a longer regulatory minimum tenor than NRO term deposits.
31. DICGC stands for Deposit Insurance and Credit Guarantee Corporation.
32. DICGC is wholly owned by RBI.
33. Eligible savings/current/fixed/recurring deposits are insured.
34. Current DICGC ceiling is ₹5 lakh including principal and interest.
35. Insurance is per depositor per bank in the same right and same capacity.
36. Different branches of the same bank are aggregated.
37. Deposits in different banks receive separate insurance limits.
38. Individual and sole-proprietorship deposits of the same person are aggregated for DICGC.
39. Deposit-insurance premium is borne by the bank.
40. DICGC does not insure mutual funds, shares or ordinary investment losses.

Module Recap#

A bank deposit creates a creditor-debtor relationship.

The depositor has a claim on the bank.

Banks organise deposits into products depending on:

• withdrawal flexibility;
• transaction needs;
• tenor;
• interest structure;
• currency; and
• residency status.

Savings and current accounts are demand deposits.

Fixed and recurring deposits are term deposits.

Account operation depends on:

• ownership;
• joint mandate;
• nomination;
• guardianship;
• survivorship.

Term deposits introduce another layer:

• contracted rate;
• maturity;
• premature withdrawal;
• callable/non-callable structure;
• renewal.

Non-resident customers use NRE, NRO and FCNR(B) accounts depending on:

• source of funds;
• currency;
• repatriability.

Finally, DICGC protects eligible deposits up to the statutory limit, but cover is calculated per depositor per bank in the same right and same capacity, not per account.

Glossary#

Account Holder - Person/entity in whose name a bank account is maintained.

Auto-Renewal - Instruction under which a term deposit is renewed automatically at maturity according to bank/product terms.

BSBDA - Basic Savings Bank Deposit Account, a basic savings product with core banking services and no conventional minimum-balance requirement.

Bulk Deposit - Single rupee term deposit at or above the regulatory threshold for the relevant bank category.

Callable Deposit - Term deposit permitting premature withdrawal subject to applicable rules.

Current Account - Non-interest-bearing demand deposit designed for frequent transactions.

Cumulative Deposit - Deposit where interest is reinvested to compound until maturity.

DEA Fund - Depositor Education and Awareness Fund maintained by RBI for transferred unclaimed deposit amounts under the statutory framework.

Demand Deposit - Deposit withdrawable on demand.

DICGC - Deposit Insurance and Credit Guarantee Corporation.

Daily Product - Method of calculating interest using each day's end-of-day balance.

FCNR(B) - Foreign Currency Non-Resident (Bank) account; foreign-currency term deposit for eligible non-residents.

Fixed Deposit (FD) - Term deposit placed for a specified period.

Former or Survivor - Joint-account mandate under which the first-named holder operates during joint lives and survivor rights arise after death as per mandate.

Inoperative Account - Account classified as inoperative after the prescribed period without qualifying customer-induced transactions.

Joint Account - Account held by two or more persons.

Maturity - Date on which a term deposit completes its contracted tenor.

Nomination - Facility allowing a depositor to name person(s) to receive deposit proceeds under the applicable framework after death.

Non-Callable Deposit - Term deposit without premature-withdrawal facility under permitted conditions.

NRE Account - Non-Resident External Rupee Account.

NRO Account - Non-Resident Ordinary Rupee Account.

Overdue Deposit - Matured term deposit whose proceeds remain unpaid/unrenewed.

Premature Withdrawal - Closure of a term deposit before maturity.

Reinvestment Deposit - Deposit in which interest is reinvested at the contracted structure until maturity.

Repatriation - Transfer of eligible funds from India to outside India under FEMA rules.

Recurring Deposit (RD) - Term deposit built through periodic instalments.

Same Right and Same Capacity - DICGC principle for aggregating deposit balances held by the same depositor in the same legal capacity at the same bank.

Savings Deposit - Interest-bearing demand deposit used for savings and transactions.

Simultaneous Nomination - Multiple nominees designated at the same time with percentage shares.

Successive Nomination - Nominees designated in order of priority/succession.

Survivorship Clause - Joint-account instruction governing operation/settlement after the death of one holder.

Term Deposit - Interest-bearing deposit accepted for a fixed period.

UDGAM - RBI's centralised portal for searching unclaimed deposits at participating banks.

Practice MCQs - Module 05#

Questions#

1. A savings account is classified primarily as:#

A. Term deposit
B. Demand deposit
C. Capital account
D. Loan account

2. A current account is generally:#

A. Interest-bearing term deposit
B. Non-interest-bearing demand deposit
C. Foreign-currency deposit only
D. Government security

3. Which is a term deposit?#

A. Savings account
B. Current account
C. Fixed deposit
D. Cash credit

4. A recurring deposit is best described as:#

A. A demand deposit
B. A term deposit built through periodic instalments
C. A current account with overdraft
D. A mutual fund SIP

5. From the bank's perspective, customer deposits are:#

A. Assets
B. Liabilities
C. Equity
D. Off-balance-sheet items only

6. Savings-account interest is calculated under RBI's framework mainly on:#

A. Minimum monthly balance only
B. Daily product basis
C. Annual opening balance only
D. Average five-year balance

7. Which account normally pays no interest?#

A. Savings
B. Current
C. Fixed deposit
D. Recurring deposit

8. Which deposit usually begins with a lump sum?#

A. Fixed deposit
B. Recurring deposit
C. Current account
D. Cash credit

9. A non-callable term deposit means:#

A. Bank cannot contact customer
B. Deposit has no premature-withdrawal option under agreed terms
C. It pays no interest
D. It has no maturity

10. A cumulative deposit differs from a payout deposit mainly because:#

A. Principal is not repayable
B. Interest is reinvested and compounds
C. It is always tax-free
D. It is always an NRI deposit

11. In an "either or survivor" joint account:#

A. Only the nominee can operate
B. Either holder may generally operate during joint lives under the mandate
C. Neither holder can operate
D. Account is always frozen until both sign

12. A nominee is:#

A. Automatically a normal joint account holder
B. A person designated for settlement under the nomination framework
C. Always the owner during depositor's lifetime
D. A bank employee

13. Under the modern bank-deposit nomination framework, a depositor can nominate up to:#

A. 1 person
B. 2 persons
C. 4 persons
D. Unlimited persons

14. Simultaneous nomination means:#

A. Nominees are used one after another only
B. Multiple nominees are designated with percentage shares
C. Only one nominee is allowed
D. Nomination is valid only for lockers

15. Successive nomination means:#

A. Nominees are arranged in priority order
B. Every nominee receives equal amount simultaneously
C. Nominee operates the account during depositor's life
D. Joint account becomes individual

16. A minor may hold a savings/fixed/recurring deposit:#

A. Never
B. Only after age 18
C. Through a natural/legal guardian under RBI framework
D. Only with SEBI permission

17. Transfer of an unclaimed deposit to DEA Fund:#

A. Extinguishes depositor's claim
B. Does not extinguish depositor's claim
C. Converts it into Government tax
D. Makes DICGC liable immediately

18. Amounts remaining unclaimed for the prescribed long period are transferred to:#

A. Investor Education and Protection Fund only
B. DEA Fund maintained by RBI
C. SEBI fund
D. Consolidated Fund automatically

19. Premature withdrawal of an FD normally means:#

A. Depositor always gets the original contracted rate
B. Interest is recalculated according to actual completed period and policy
C. No interest can ever be paid
D. RBI decides each individual FD penalty

20. If a matured term deposit remains unpaid/unclaimed, RBI's framework generally applies:#

A. Highest FD rate forever
B. Lower of savings rate or contracted matured TD rate
C. Zero interest in every case
D. Repo rate

21. A bank's premature-withdrawal penalty should be:#

A. Secret
B. Disclosed according to the approved policy
C. Decided after withdrawal
D. Set by customer

22. A loan against FD allows the customer to:#

A. Borrow against the deposit instead of necessarily breaking it
B. Convert FD into equity automatically
C. Avoid repaying loan
D. Receive DICGC twice

23. NRE stands for:#

A. Non-Resident External Rupee Account
B. National Reserve Equity
C. Non-Refundable External Account
D. National Remittance Entry

24. NRO stands for:#

A. Non-Resident Ordinary Account
B. National Reserve Obligation
C. Non-Rupee Overseas Account
D. New Resident Option

25. FCNR(B) is denominated in:#

A. Indian rupees only
B. Foreign currency
C. Gold
D. Government securities

26. Which account is generally associated with Indian-source income of an NRI?#

A. NRO
B. FCNR(B) only
C. BSBDA only
D. Cash credit

27. Which rupee account is generally repatriable?#

A. NRE
B. NRO without conditions
C. Current resident account
D. BSBDA only

28. FCNR(B) is primarily:#

A. Demand deposit
B. Foreign-currency term deposit
C. Current account
D. Loan product

29. Recurring deposits under FCNR(B) are:#

A. Mandatory
B. Not accepted
C. Allowed only for minors
D. Allowed only in rupees

30. Which account reduces exchange-rate risk for an NRI who wishes to keep the deposit denominated in foreign currency?#

A. NRO
B. NRE
C. FCNR(B)
D. Resident savings

31. DICGC stands for:#

A. Deposit Insurance and Credit Guarantee Corporation
B. Deposit Investment and Credit Growth Council
C. Domestic Insurance and Capital Guarantee Corporation
D. Deposit Interest Control and Guarantee Council

32. DICGC is wholly owned by:#

A. SEBI
B. RBI
C. SBI
D. Government of India directly as a department

33. Current DICGC insurance ceiling is:#

A. ₹1 lakh
B. ₹2 lakh
C. ₹5 lakh
D. ₹10 lakh

34. DICGC cover includes:#

A. Principal only
B. Interest only
C. Principal plus interest up to the ceiling
D. Only current accounts

35. Deposit insurance limit applies:#

A. Per account
B. Per branch
C. Per depositor per bank in same right and same capacity
D. Per nominee

36. A depositor holds ₹3 lakh savings and ₹3 lakh FD in the same bank, same capacity. Maximum DICGC cover is:#

A. ₹3 lakh
B. ₹5 lakh
C. ₹6 lakh
D. ₹10 lakh

37. Deposits in two different banks are:#

A. Always aggregated into one ₹5 lakh limit
B. Insured separately subject to each bank's limit
C. Not insured
D. Insured only if branches differ

38. Same depositor holds deposits in two branches of the same bank. Insurance is:#

A. Separate ₹5 lakh per branch
B. Aggregated across branches for the bank
C. Unlimited
D. Not available

39. Who pays DICGC premium?#

A. Depositor
B. Insured bank
C. Nominee
D. Ministry of Finance directly for each account

40. Which is NOT covered as an insured bank deposit merely because it was bought through a bank?#

A. Fixed deposit
B. Savings deposit
C. Mutual fund unit
D. Recurring deposit

41. A sole proprietor's business deposit and individual deposit are generally:#

A. Always separately insured by ₹5 lakh each
B. Aggregated under DICGC because proprietor and proprietorship are same legal capacity for this purpose
C. Uninsured
D. Treated as Government deposits

42. Nomination affects DICGC cover by:#

A. Multiplying it by number of nominees
B. Not changing the insurance ceiling calculation
C. Doubling it automatically
D. Removing all insurance

43. "Same right and same capacity" is most closely associated with:#

A. Monetary policy
B. Deposit insurance aggregation
C. PSL
D. CRR

44. DICGC's special statutory framework for banks under restrictive All-Inclusive Directions targets settlement within:#

A. 15 days in every case
B. 30 days in every case
C. 90 days subject to statutory conditions
D. 1 year minimum

45. Which sequence best summarises this module?#

A. Deposits → account operation → interest/maturity → NRI accounts → deposit insurance
B. Repo → CRR → Basel → GDP → insurance
C. UPI → cards → RTGS → NPA → deposits
D. Equity → mutual funds → futures → deposits

Answers and Explanations#

1. B — Demand deposit.
Savings deposits are withdrawable on demand.

2. B — Non-interest-bearing demand deposit.
Ordinary current accounts generally do not earn interest.

3. C — Fixed deposit.
FD is a classic term deposit.

4. B — A term deposit built through periodic instalments.

5. B — Liabilities.
The bank owes the deposit amount to the customer.

6. B — Daily product basis.
Savings interest is calculated on end-of-day balances.

7. B — Current account.

8. A — Fixed deposit.
RD instead builds through recurring contributions.

9. B — No premature-withdrawal option under agreed terms.

10. B — Interest is reinvested and compounds.

11. B — Either holder may generally operate during joint lives.

12. B — Person designated for settlement after death.

13. C — 4 persons.
The modern nomination framework permits up to four nominees.

14. B — Multiple nominees with percentage shares.

15. A — Nominees are arranged in priority order.

16. C — Through a natural/legal guardian.

17. B — It does not extinguish the claim.

18. B — DEA Fund maintained by RBI.

19. B — Interest is recalculated for the actual completed period and policy.

20. B — Lower of savings rate or contracted matured-TD rate.

21. B — Disclosed under approved policy.

22. A — Borrow against the deposit.

23. A — Non-Resident External Rupee Account.

24. A — Non-Resident Ordinary Account.

25. B — Foreign currency.

26. A — NRO.

27. A — NRE.

28. B — Foreign-currency term deposit.

29. B — Not accepted.

30. C — FCNR(B).

31. A — Deposit Insurance and Credit Guarantee Corporation.

32. B — RBI.

33. C — ₹5 lakh.

34. C — Principal plus interest up to the ceiling.

35. C — Per depositor per bank in same right and same capacity.

36. B — ₹5 lakh.
₹6 lakh is aggregated, but insurance is capped.

37. B — Separate per bank.

38. B — Aggregated across branches.

39. B — Insured bank.

40. C — Mutual fund unit.
DICGC protects eligible deposits, not market investments.

41. B — Aggregated.

42. B — Nomination does not change the insurance ceiling calculation.

43. B — Deposit insurance aggregation.

44. C — 90 days subject to statutory conditions.

45. A — Deposits → operations → interest/maturity → NRI accounts → insurance.

Official Sources and Further Reading#

The module is based primarily on RBI, DICGC and Government sources. Current thresholds and operational rules should be refreshed when regulators amend them.

Source 1 - RBI Master Direction on Interest Rate on Deposits#

https://rbi.org.in/Scripts/BS_ViewMasDirections.aspx?id=10296

Used for:

• current account definition and non-interest-bearing treatment;
• savings deposits;
• daily-product interest;
• domestic term-deposit tenor;
• bulk deposits;
• non-callable deposits;
• premature withdrawal;
• overdue deposits;
• senior-citizen treatment;
• NRE/NRO deposit interest;
• FCNR(B) tenor and interest framework.

Source 2 - RBI FAQs on Interest Rate on Deposits#

https://www.rbi.org.in/commonman/Upload/English/FAQs/PDFs/FAQIRD01042025.pdf

Used for:

• interpretation of the deposit-interest framework;
• reinvestment deposits;
• premature-withdrawal policy;
• eligible savings-account categories.

Source 3 - RBI Customer Service / Deposit Account Instructions#

https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=9862

Used for:

• minor accounts;
• joint accounts;
• nomination;
• deceased-depositor settlement principles;
• customer-service concepts.

Source 4 - Banking Laws (Amendment) Act, 2025 - Nomination Provisions#

Government / PIB release:

https://www.pib.gov.in/PressReleasePage.aspx?PRID=2181734

Used for:

• nomination provisions effective from 1 November 2025;
• up to four nominees;
• simultaneous and successive nomination;
• percentage allocation in simultaneous nomination.

Source 5 - RBI Inoperative Accounts / Unclaimed Deposits - Amendment 2025#

https://www.rbi.org.in/Scripts/BS_CircularIndexDisplay.aspx?Id=12864

Used for:

• 10-year unclaimed-deposit framework;
• transfer to DEA Fund;
• KYC activation at all branches;
• V-CIP and Business Correspondent facilitation.

Source 6 - RBI / FEMA - Foreign Exchange Management (Deposit) Regulations#

https://systemhealth.rbi.org.in/Scripts/NotificationUser.aspx_Id%3D10325%26Mode%3D0.html

Used for:

• NRE;
• NRO;
• FCNR(B);
• foreign-exchange legal framework.

Source 7 - RBI FAQs - Accounts in India by Non-residents#

https://www.rbi.org.in/commonman/Upload/English/FAQs/PDFs/Accountresidents16012025.pdf

Used for:

• NRE/NRO comparison;
• repatriability;
• eligible debits/credits;
• NRO remittance framework.

Source 8 - DICGC Guide to Deposit Insurance#

https://www.dicgc.org.in/guide-to-deposit-insurance

Used for:

• insured banks;
• insured deposits;
• exclusions;
• ₹5 lakh ceiling;
• same right and same capacity;
• branch aggregation;
• different-bank treatment;
• joint accounts;
• sole proprietorship;
• premium payment;
• AID claim-settlement framework.

Source policy for this module#

For deposit rules, use RBI/DICGC/Government material rather than bank marketing pages or coaching notes.

Bank product brochures may be useful for examples but should not be treated as the authoritative source for regulation.