question_answer

What are 'demand deposits'? Describe any three salient features of demand deposits.            [Foreign 2008]

Answer:

Demand deposit: Deposits in the bank account which are payable on demand are called demand deposits. Features of demand deposits are;

(i) People have the provision to withdraw the money as and when they require.

(ii) Interest is paid by the bank on these deposits (If they come under saving account deposits - i.e. personal accounts and not business account/ current account).

(iii) Bank allows the owner of demand deposits to make out a cheque for a specific amount.