Deposit: Importance & types, Profit mark-up.

Deposit:

•    Deposit is a Current liabilities of a bank in the form of Current accounts, Notice deposits, Savings deposits, Fixed deposits etc.

•    In other words money transferred into a customer account at a financial institution.

Importance of deposit:

Before discussing about the importance of deposit, we have to know/discuss about the function of a Bank. In short we may say that the following are the main functions:

1)    Obtaining deposit from different avenues.
2)    Issue of cheque, Pay order, Demand draft, TT etc, though now a days Banks are doing more & more.
3)    Invest money to the client for business purpose.
From the above it is clear to us that obtaining deposit is the first & main function of a Bank. If we cannot obtain deposit at lower rate & invest the same at a higher rate (Spread at least 3%), Bank cannot survive. So deposit is the lifeblood of a Bank. Without deposit no Bank can run. Low-cost and no-cost deposit is very much helpful for the Bank.

Types of Deposit:
Deposit are mainly in two types, as per BRPD Circular No. 03 dated 10.07.97 & 06 dated 24.06.07 deposit can be defined as followings:
1)    Demand Deposit
2)    Time Deposit

1) Demand Deposit: An account from which deposited funds can be withdrawn at any time without any notice. On the other hand we can say that the deposit which may be allowed/withdrawn on demand is called Demand Deposit. Such as the balance of CD, SB etc.. For calculating the demand deposit, there is a formula:

a)    100% balance of Al-Wadia CD A/C
b)    9% balance of Mudaraba SB A/C
c)    100% balance of Bills
d)    100% Sundry deposit


2) Time Deposit: The time deposit is a common form of savings that place restrictions on when a depositor can withdraw funds. i.e. moneys deposited by the customer repayable after the expiry of a certain period which ordinarily ranges from 3 months to 3 years. The period of deposit is usually fixed at the time of the deposit is made. Depositors of this category give their explicit consent to the Bank to invest the same in any business at the discretions of the Bank with a view to earn profit in a more remunerative manner. Time Deposits constitute a very important resource for Banks.
 
Here is also a formula:
a)    91% balance of Mudaraba SB A/C
b)    100% Mudaraba STD A/C
c)    100% balance of MTDR (FDR)
d)    100% balance of Scheme A/C

From the data given below we may calculate Demand Deposit & Time Deposit.

01.    Al-Wadia Current Deposit        Tk.    30607967.09       
02.    Mudaraba Savings Deposit        Tk.    21085388.14       
03.    Mudaraba Sort Term Deposit    Tk.    1546250.25       
04.    Mudaraba Term Deposit           Tk.    250302045.95       
05.    Mudaraba Sundry Deposit         Tk.    32401353.90       
06.    Mudaraba Scheme Deposit       Tk.    260568151.00       
07.    Bills Payable                           Tk.    2541832.54       
        Total                                      Tk.    597506738.62
   
Answer:
         Demand Deposit                                     Time Deposit
3,06,07,967.09 X 100%    30607967.09    2,10,85,388.14 X 91%    19187703.21
2,10,85,388.14 X   91%    1897684.93    25,03,02,045.95 X 100%    250302045.95
15,46,250.25 X 100%       1546250.25    26,05,68,151.00 X 100%    260568151.00
3,24,01,353.90 X 100%    32401353.90
25,41,832.54 X 100%        2541832.54
Total                            67448838.46                                        530057900.16