Operational Aspects of Deposit Accounts | PAPER II – PRINCIPLES & PRACTICES OF BANKING | MODULE A: GENERAL BANKING OPERATIONS

Banker – Operational Aspects of Deposit Accounts

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Salient Features of Deposit Accounts

Deposit accounts allow customers to deposit money in a bank, earning interest depending on the account type. These include Savings Accounts, Current Accounts, Fixed Deposits, and Recurring Deposits. Features include easy fund access, security, nomination, and interest earnings.

Interest on Deposit Accounts

Interest is paid based on the account type and RBI guidelines. Savings accounts earn nominal interest, while fixed and recurring deposits offer higher returns. Interest is generally compounded quarterly.

Prohibitions & Exemptions

Banks are prohibited from paying interest on current accounts. KYC norms must be followed. Exemptions are granted for specific government accounts and organizations under RBI or central directives.

Inoperative Accounts & Unclaimed Deposits

Accounts with no activity for 2 years are classified as inoperative. Unclaimed deposits are transferred to the Depositor Education and Awareness Fund after 10 years. Banks must inform customers before this classification.

Operational Instructions in Joint Accounts

Joint accounts can be operated jointly or by either party. Instructions like "Either or Survivor" define the authority to operate during life and after death of a holder.

Nomination Facility

Banks provide a nomination facility to depositors under the Banking Regulation Act. This ensures smooth transfer of funds in case of the depositor’s death, without legal hassle.

Other Operational Guidelines

Guidelines include KYC compliance, due diligence, proper documentation, regular updating of customer details, and following RBI norms on AML (Anti-Money Laundering).

Attachment Orders

Attachment orders from courts, enforcement authorities, or tax departments freeze operations in accounts. Banks must comply and report accordingly.

Procedure for Submission of Records to Statutory Authorities

Banks are required to furnish records to statutory authorities such as Income Tax, Enforcement Directorate, or SEBI under relevant laws. Timely and accurate submission is mandatory to avoid penalties.

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MCQs – Banker Operational Aspects of Deposit Accounts

1. What is the minimum period for classifying an account as inoperative?
A. 6 months
B. 1 year
C. 2 years
D. 5 years
Answer: C

2. Who can issue attachment orders to freeze a bank account?
A. Bank Manager
B. Depositor
C. Court or Statutory Authority
D. RBI
Answer: C

3. What is the purpose of the nomination facility?
A. To increase deposit interest
B. To authorize joint account operation
C. To enable fund transfer to nominee after depositor's death
D. To provide overdraft facility
Answer: C

4. Which type of account is NOT eligible to earn interest?
A. Savings Account
B. Current Account
C. Fixed Deposit
D. Recurring Deposit
Answer: B

5. Under what scheme are unclaimed deposits transferred after 10 years?
A. PMJDY
B. DEAF
C. DBT
D. TDS Scheme
Answer: B

6. "Either or Survivor" is a mandate used in:
A. Nominee selection
B. KYC verification
C. Joint account operations
D. Inoperative account revival
Answer: C

7. Which authority sets the guidelines for deposit interest rates?
A. SEBI
B. Ministry of Finance
C. RBI
D. IBA
Answer: C

8. How often is interest generally compounded in deposit accounts?
A. Annually
B. Semi-annually
C. Quarterly
D. Monthly
Answer: C

9. KYC compliance is mandatory under:
A. Companies Act
B. Banking Regulation Act
C. RBI AML Guidelines
D. Income Tax Act
Answer: C

10. What must a bank do before classifying an account as inoperative?
A. Close the account
B. Notify the customer
C. Transfer to current account
D. Convert to fixed deposit
Answer: B