Deposits

Usually, we put our savings and surplus money in a bank for three main reasons.

1) Safety 

2) Liquidity

3) Returns as Interest income.

Such money kept in the banks is called a Deposit.

Keeping your deposits in a Government owned or Reputed bank is advisable. Because, even if the bank goes bankrupt, you will get back your money as these well founded entities maintain good standards including the practice of taking insurance cover for the deposits made by you.

There are basically three  types of Deposit accounts which yield an income to you. They are

1)Savings deposits: Any amount can be deposited here and withdrawals are frequently allowed with certain restrictions. But the rate of interest earned here is low as compared to the two types described below.

2) Fixed Deposit: One time and lump sum amount is deposited for a specified period .Normally, accepted for up to 10 years. 

3) Recurring Deposits: Deposits of amount are made every month for a specified period with the maximum of 10 years.

A hybrid of Savings and Fixed deposits is also now available in many banks. They are called by various names in different banks. One bank named it as "FLEXI Deposit".

The main feature of the hybrid variety is the sweep-in facility where you have to choose 

a) the amount of sweep to be done when the balance in your account  goes above a level fixed by you.

b) the period for which the amount swept, to be kept as a fixed deposit so that you gain from higher rate of interest paid on the deposits kept in Fixed account.

The major advantages of the hybrid account are

1) Flexibility to operate your account 

    You can draw any amount and whatever remains in the bank will yield more income

2) The hassle of opening separate deposits can be avoided.

3)  No need to take a loan or overdraft when you need more money and pay interest for the pre-closed fixed deposits.