Bank Deposit Schemes
Demand deposits you can withdraw any time, term deposits you lock in. Here are the rules for each.
Banks offer two broad kinds of deposit. Demand deposits (savings and current accounts) can be withdrawn whenever you want. Term deposits (fixed and recurring deposits) are kept for a fixed period and earn more interest in return.
Recovery agents deal with borrowers, not depositors, but the DRA exam includes deposits because they are the base of banking: a bank lends what depositors keep with it. Knowing the products also helps when a borrower offers to break an FD to clear a loan.
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The Main Deposit Types
Savings account
How it works
Money withdrawable on demand, with limits on the number or amount of withdrawals set by the bank
Interest
Yes, calculated on the daily closing balance
Current account
How it works
For businesses; withdrawals allowed any number of times within the balance or agreed limit
Interest
No interest
Fixed deposit (FD)
How it works
A lump sum kept for a fixed period, from 7 days upward
Interest
Higher, fixed for the term
Recurring deposit (RD)
How it works
A fixed amount paid in every month for a fixed period
Interest
Term deposit rates, like an FD
Notice deposit
How it works
A term deposit withdrawable after giving at least one full banking day's notice
Interest
Term deposit rates
| Deposit | How it works | Interest |
|---|---|---|
| Savings account | Money withdrawable on demand, with limits on the number or amount of withdrawals set by the bank | Yes, calculated on the daily closing balance |
| Current account | For businesses; withdrawals allowed any number of times within the balance or agreed limit | No interest |
| Fixed deposit (FD) | A lump sum kept for a fixed period, from 7 days upward | Higher, fixed for the term |
| Recurring deposit (RD) | A fixed amount paid in every month for a fixed period | Term deposit rates, like an FD |
| Notice deposit | A term deposit withdrawable after giving at least one full banking day's notice | Term deposit rates |
Rules That Apply to Deposits
From RBI's rules on deposit interest, first set out in its 2016 Interest Rate on Deposits Directions.
- check_circleEach bank sets its own deposit rates under a board-approved policy. Rates must be published in advance, be the same at every branch for similar deposits, and are not open to negotiation.
- check_circleA term deposit cannot be for less than 7 days.
- check_circleTerm deposits of individuals and HUFs of up to ₹1 crore must allow premature withdrawal. If you break an FD early, you get interest at the rate for the period it actually stayed with the bank, minus any penalty under the bank's policy. If you break it before 7 days, you get no interest.
- check_circleA depositor can name a nominee to receive the money after death. Since 1 November 2025, under the Banking Laws (Amendment) Act, 2025, a depositor can name up to four nominees, either together with a share for each or one after another. For lockers and safe custody, nominees can only be one after another.
- check_circleIf an account is not operated for 10 years, or a deposit stays unclaimed for 10 years, the bank transfers it to RBI's Depositor Education and Awareness Fund. The depositor can still claim it from the bank afterwards.
Deposit Insurance: ₹5 Lakh per Depositor per Bank
The Deposit Insurance and Credit Guarantee Corporation (DICGC), an RBI subsidiary, insures savings, current, fixed and recurring deposits up to ₹5 lakh per depositor in each bank, principal and interest together. Accounts held in the same right and capacity at all branches of one bank are added together. Deposits of governments and other banks are not covered.
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When a Borrower Offers a Deposit to Clear a Loan
Say a borrower is 95 days late on a personal loan and has an FD at the same bank. The borrower may choose to break the FD and pay. The bank may also have a contractual right to adjust it (the right of set-off), subject to the loan terms.
An agent must never pressure a borrower into breaking someone else's deposit, such as a parent's FD. Only the borrower's own money and the borrower's own decision count.
How the DRA Exam Tests This
Expect simple fact questions: "Which account earns no interest?" (current account), "What is the minimum tenor of a term deposit?" (7 days), "What is the DICGC cover?" (₹5 lakh per depositor per bank). Recurring deposits are term deposits, a point that catches people out.
The common trap is thinking the ₹5 lakh cover is per account or per branch. It is per depositor per bank, with all accounts in the same capacity added together.
FAQs
Is a recurring deposit a term deposit?expand_more
Yes. RBI's definition of a term deposit includes recurring, cumulative, annuity and reinvestment deposits.
How much of my bank deposit is safe if the bank fails?expand_more
DICGC insures up to ₹5 lakh per depositor per bank, including interest. Money above that in the same bank and capacity is not insured.
Can I break my FD before maturity?expand_more
Yes, for deposits of individuals and HUFs up to ₹1 crore the bank must allow it. You get interest at the rate for the period the deposit actually ran, minus any penalty under the bank's policy.
What happens to money in an account I haven't used for 10 years?expand_more
The bank moves it to RBI's Depositor Education and Awareness Fund. It is still yours; you can claim it back through the bank.
Next steps
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