Collecting deposit
Category: General Banking
This concerns collecting deposits on current account and savings accounts. Banks have no monopoly on this activity, as for example post-offices other merchant services and Insurance companies and pension funds are also entitled to collect public savings.
A current account can be opened by companies or private customers. It is interesting for banks since the interest to be paid is usually very low; but these accounts register many operations.; moreover, these resources are not stable for Banks.
A savings account is an amount of money that is deposited in a Bank for a fixed amount of time; the initial amount will be paid back at maturity, plus interest, the rate of which has been agreed between the sustomer and the bank.
The interest rate depends on the initial amount deposited and the duration; these resources are more stable, have a low management cost but the interest rate to be paid can be high.
Why does a Bank try to attract deposits from customers?
The more resources the bank gets from deposits, the more credits it can grant (customers, interbank credits).
The cost of these resources is lower than others to be collected on interbank markets, or by issuing securities.
It decreases the dependence of the Bank on the interbank and financial markets.
To attract deposits from customers,
A Bank must have a good network of branches to be close to its customers.
A Bank should have staff with a good marketing skills.
A Bank should offer a large range of services and products adapted to customers’ requirements.
A Bank should pay interest rates high enough to compete with other banks, but no higher than the interest to be paid on the other markets.