Deposits refer to the sum of money placed by an individual or organization into a financial institution, such as a bank or non-banking financial company (NBFC), for safekeeping and earning interest. These funds are repayable to the depositor either on demand or after a specified period, depending on the type of deposit.

Deposits form the backbone of the banking system, enabling financial institutions to mobilize public savings and channel them into productive lending activities. They also play a crucial role in maintaining liquidity and stability in the financial ecosystem.

Types of Deposits:

• Demand Deposits: These can be withdrawn by the depositor at any time without prior notice. Examples include Savings Accounts and Current Accounts. They are suitable for individuals and businesses needing frequent access to funds.
• Time Deposits: Also known as Term Deposits or Fixed Deposits (FDs), these are held for a specific period and usually offer higher interest rates compared to demand deposits. Withdrawals before maturity may attract penalties.
• Recurring Deposits (RDs): Allow depositors to invest a fixed amount regularly (usually monthly) for a specified term. Upon maturity, the depositor receives the invested amount plus accumulated interest.

Key Features of Deposits:

• Safety: Deposits held in regulated banks are considered low-risk, and small amounts are insured under the Deposit Insurance and Credit Guarantee Corporation (DICGC).
• Interest Income: Depositors earn interest based on the type and duration of the deposit.
• Liquidity: While savings accounts offer immediate liquidity, fixed deposits provide returns for those who can lock in funds for longer periods.

Example: If an individual deposits ?1,00,000 in a fixed deposit for one year at 7% annual interest, they will earn ?7,000 as interest at maturity, assuming no premature withdrawal.

In conclusion, deposits are a secure and essential component of the financial system. They offer individuals a way to grow their savings while providing banks with the funds needed to extend loans and support economic growth.