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TERM DEPOSITS – GENERAL
Term deposit is a deposit received by the bank for a specific fixed period of time which is withdrawable only after the expiry of the said fixed period and shall also include recurring deposits, fixed deposits, long term deposits or other deposits of similar nature.
Eligible Categories to open a term deposit account are:
Joint Account of Individuals
Club, Societies, Association
Government or Semi Government departments
Minors alone of the age of 12 years and above can open term deposits in their own name to be operated by them. Discharge given by the minor to the bank on the repayment of deposit to him is a valid discharge. Even repayment of this deposit before the due date can be made, if the discharge of the minor is properly obtained.
Term deposit in the name of minor to be operated by guardian can be opened. If the payment of maturity amount is made to the guardian, it will be payment in due course. But proper undertaking that the proceeds will be used for the benefit of the minor must be obtained while making payment to the guardian. He is to receive payment for the use and benefit of the minor. Such payments made by the bank to the guardian of minor cannot be challenged by the minor neither during his minority nor after attaining majority for not being utilised for his benefit.
If the term deposit is made payable to the minor after he attains majority, it shall be paid only to the minor when he attains majority. Such amount shall not be paid to the guardian before or after the due date.
Branches can open joint accounts in the name of minor along with his natural guardian to be operated jointly. In such cases signature of both of them should be obtained, or the guardian must sign in dual capacity. Such accounts can be opened safely as signature of minor or guardian or the guardian in his dual capacity is available. Foreclosure of such accounts does not involve any risk.
Branches may open fixed deposit accounts in the names of minor and the guardian with ‘either or survivor’ clause. There is no risk involved in making repayment of the term deposit on maturity to either or survivor of the two. A receipt by anyone of them at maturity gives a valid discharge to the bank. On making payment to minor on maturity signature of guardian should be obtained. However, it is necessary to take both signatures or the signature of the guardian in dual capacity at the time of foreclosure of the deposit.
Joint account with clause either or survivor/anyone or survivor(s)
In case the term deposit is either or survivor/anyone or survivor or survivors, loan/foreclosure is entertained when all the joint account holder apply for it. In the event of death of one of the account holder, request shall come from all the surviving joint account holder(s) along with their legal heirs of the deceased. In order to remove such disability on the part of surviving joint account holder(s), the following enabling clause shall be included in the account opening form itself.
“We agree that the clause repayable to either or survivor/anyone or survivor(s) includes the right to the survivor(s) to apply before the date of maturity for repayment or for credit facilities against the security of the deposit.”
If the either or survivor deposit account is to be renewed, renewal can be made only if all the depositors agree in writing. However, the branches may face practical difficulties in obtaining signatures from all the joint deposit holders for renewals. To obviate this difficulty, a clause may be included in the account opening form to the effect that anyone of the depositors may renew the deposit, in the same names.
Application for deposits on behalf of the partnership firm must be signed by all the partners and instruction should be obtained as to who among them is/are authorised to receive the interest and payment on maturity. If the firm is already maintaining current account, it is sufficient if the opening form is signed by one or more persons singly or jointly who is/are authorised to operate on the current account. It is advisable to obtain the Partnership Letter signed by all the partners in their individual capacity. But where the firm already maintains a current account, production of partnership letter need not be insisted upon, provided such partnership letter has been already obtained while opening the current account and is also available on our record.
Government/Semi Government Bodies, Limited Companies
The request to open such account must be made on the letter head of the institution. Letter must contain all the important information i.e. Name, Address, Amount of Deposit, Period of Deposit, Payment of Interest, Name of the person authorised to discharge the deposit receipt.
A copy of resolution authorising such investment to be made with our bank shall be obtained, if possible. This may be attached to the application form/letter.
Bank should also obtain specimen signature of the authorised officer of the organisation duly attested by the Chairman of the organisation.
Payment of proceeds not in cash
Payment of proceeds on the maturity of term deposits must be made to the party in the form of Pay Order/Demand Draft crossed ‘Account Payee’, or credit to the account of the institution. In no case payment shall be made in cash.
RATE OF INTEREST :Rate of interest of term deposits to be paid by cooperative bank has been deregulated by Reserve bank of India from October 17,1994. Now the management of the cooperative bank decides the rate of interest payable on term deposits.
The interest on term deposits is payable at quarterly intervals. However, the interest on Fixed Deposits can be paid monthly, at discounted factor. The interest on term deposit is to be compounded quarterly. So, where the compounding of interest is to be done quarterly, such deposits i.e. Long Term Deposits, Recurring Deposits etc, shall be accepted for period which are multiple of three months only. However this restriction does not apply to fixed deposits where interest is either paid on monthly, quarterly or half yearly basis.
PERIOD OF TERM DEPOSIT: Term deposit can normally be accepted for a minimum period as directed by the head office from time to time and a maximum period of 120 months. Such period is, however, subject to change from time to time as per the directive or RBI or the management of bank.However, in the following cases term deposits can be accepted for a period more than 120 months:
1. Uptill a Minor attains majority.
2. Order from the court
3. Staff member with their minor children
PREMATURE REPAYMENT / FORECLOSURE
If the payment of term deposit is made before the completion of period of deposit agreed, the rate of interest payable in respect of such term deposit shall be the one applicable to the period for which the deposit remained with the bank, less one percent.
If a term deposit is prematurely paid before the expiry of minimum days of term deposits, no interest shall be paid on such deposit. However if a loan was availed on this term deposit, interest rate applicable on such loan will be the same as applicable for temporary overdrafts at that point of time.
In case the depositor dies before the maturity of the term deposit, his legal heirs may ask for premature payment of the term deposit. In such cases premature payment of term deposit shall be made without imposing penalty of 1 % and the interest shall be paid at the rate as applicable to the period actually as ruling on the date of opening of the deposit.
In the event of premature payment of a term deposit standing in joint names, upon the death or one of the joint depositor, the interest shall be paid at the rate applicable for the period for which deposit actually remained with the bank.
Payment of Interest on Overdue Deposits
As per the directive of the Reserve Bank, the interest on an overdue term deposits can be paid in the following manner:
i) Interest for overdue period can be allowed if the deposit is renewed from the date of maturity itself and not from the date of presentation.
ii) Overdue deposit must be renewed at least for the minimum acceptable period of term deposit from the date of presentment of the term deposit receipt.
iii) The rate of interest allowed should be the appropriate rate operative on the date of maturity of such overdue deposits. Any revision, whether upward or downward in the rates, effected by Reserve Bank of India / or our Bank between the date of maturity of original deposit (overdue deposit) and the date of presentation for renewal is not to be taken into consideration.
iv) In case the customer wants to renew a portion of overdue deposit, it may be conceded and renewal should be done from the date of maturity with interest (from the date of maturity) being allowed only on the renewed a portion of the deposit.
v) Additional amount shouldnot be accepted along with overdue deposit while it is being renewed after the date of maturity.
vi) Two or more overdue deposits may be combined and a consolidated deposit receipt may be issued from the date of maturity provided the deposit belong to the same person and maturity dates are identical. Where deposits are combined, the fact should be mentioned in the consolidated deposit receipt. Branches should not combine two or more overdue deposits which matured at different rates.
vii) Overdue interest shall be paid on the entire amount of deposit, i.e., the interest added deposit kept in overdue deposit.
viii) While renewing the overdue deposit, the name of the depositor as appeared in the matured deposit should not be altered. Deposit in name of X should not be renewed in the name of Y.
ix) Proceeds of an overdue Recurring Deposit account can be treated at par with other term deposits for the purpose of renewal and payment of overdue interest provided the proceeds of matured Recurring Deposit deposited in Fixed Deposit or Long Term Deposits schemes.
In case of the overdue deposit has been renewed from the date of maturity and the customer wants premature payment of that renewed deposit, no interest is to be paid for the renewed period.