2.1 Introduction
A Term Deposit (TD), also known as ‘fixed deposit’ isa deposit that is held at a financial institution for a fixed term. Afixed deposit account allows customers to deposit money for a set periodof time, thereby earning a higher rate of interest in return. These areof varyingmaturities ranginganywhere from a day or a monthto a few years. When a term deposit is placed,the lender (the customer)understands that the money can only be withdrawn after the term has endedand in case of premature withdrawal, the financial institution can levya penalty. In some cases, the customer may be required to give noticeof withdrawal of term deposit (in that case termed as ‘notice deposits’).When the term is over, the deposit can be withdrawn or it can be heldfor another term, partly or fully. Generally speaking, the longer theterm the better is the yield on the money.
Some banks put conditions like minimum amount of deposit and in multiplesof specific units of amount. For e.g. the minimum deposit amount is Euro.100 and deposits can be made in multiples of Euro 10. Banks may allowfull or partial withdrawal of amount. Customers can place TD as collateralwhile availing loan facility or while availing Letters of Credit/Guaranteefacility from the bank.
Recurring Deposit (RD) is an account where the lender/customer depositsa fixed amount of money every month for a fixed tenure (generally rangingfrom one year to five years). This scheme is meant for investors whowant to deposit a fixed amount every month, in order to get a lump sumafter some years. The small monthly savings in the Recurring Depositscheme enable the lender to accumulate a handsome amount on maturity.Interest at TD rates is computable on monthly or quarterly compoundedbasis.
Dual Currency Deposit (DCD) is a short-term currency-linked depositthat allows the lender to earn a higher interest rate than regular TD.The bank provides the customer/lender with a 'yield enhancement' overand above the normal TD rate. In return, the bank has the right to convertthe deposit currency into a linked currency at the pre-determined conversionrate on the fixing date. The fixing date may be few (for instance 2)working days prior to deposit maturity. Thus, at maturity, the lendershall receive the principal and interest in either the deposit currencyor the linked currency, whichever is weaker. In other words, while takingthe deposit the bank also buys a currency option from the depositor andthe enhanced interest is the premium the bank pays for this option.
2.2 Term Deposit in Oracle FLEXCUBE
In Oracle FLEXCUBE, you can create and service a deposit (TD, RD andDCD) either through the TD module or by using the Savings (Teller/Branch)module.
This section contains the following topics:
- Section 2.2.1, "Salient Features"
- Section 2.2.2, "Pre-requisites for TD Processing"
2.2.1 Salient Features
The salient features of TD module are listed below:
- Automation - Accounting, collateral tracking, rollover handling andaccounting, and tracking of unclaimed deposits are completely automated.This means your staff with the treasury department can remain focusedon customer service.
- Multi Mode Pay-in - TD can be funded using multiple pay-in modes.You can choose any combination of the following pay-in modes:
- Pay in by transfer from GL
- Pay-in by Savings Account
- Pay-in by Cash (Only from Savings module)
- Pay-in by Cheque
- Multi Mode Pay-out – In case of automatic and manual redemption,a TD can be redeemed using multiple pay-out modes. You can choose anycombination of the following pay-out modes:
- Pay-out by Banker’s Cheque
- Pay-out by funds transfer to any account specified by the customer
- Pay-out by child TD creation – wherein another TD is createdusing the maturity amount
- Pay-out by transfer to GL
- Pay-out by cash (Only from Savings module)
- Pay-out by Demand Draft
- Pay-out by PC
- Simulation – The TD module offers a simulation tool whereina TD can be simulated to enhance sales and service aspects to new/existingcustomers.
You can also generate a TD Certificate.
2.2.2 Pre-requisites for TD Processing
To handle a term deposit in Oracle FLEXCUBE, you need to:
- Set up a suitable account class
- Set up an IC rule
- Set up a suitable IC product
- Maintain UDE + Account Class combination
- Define IC rates
- Define floating interest rates
- Maintain a term deposit account
- Define Interest ‘Conditions’ and other parametersfor the deposit account
- Maintain Pay-in and Close out mode parameters
This manual explains how you can create and service a deposit throughthe TD Module.
For details about TD creation using Branch, you may refer theSavings User Manual.
