Definition of Deposit
What is meant by deposit? The term deposit is a banking product in the form of a term savings service that offers a fixed interest rate in accordance with the previous agreement.
Deposits are time deposit service products at banks that promise higher interest than ordinary savings. However, deposits and withdrawals of deposits can only be done at certain times.
The greater the funds and the longer the time of deposit disbursement, the greater the interest that will be earned by the customer. However, if the customer wants to withdraw funds from his deposit earlier than the agreed time, the customer will be subject to penalties.
In other words, this term savings product is more suitable for customers who want to invest their funds in the bank. Although the benefits are not as large as stock and commodity investments, time deposit savings tend to be safer and profits are relatively stable.
Also read: Definition of Investment.
Definition of Deposit According to Experts
In order to better understand what the deposit means, then we can refer to the opinions of the following experts:
1. Thomas Suyatno
According to Thomas Suyatno, the definition of a deposit is a savings account at a bank where withdrawals can only be made within a certain time period in accordance with the agreement between the customer and the bank concerned.
2. Lukman Dendawijaya
According to Lukman Dendawijaya, the definition of deposits is deposits from third parties to banks whose withdrawal system can only be done within a certain period based on an agreement between the third party and the bank concerned.
3. Muhammad Hassanudin and Habib Nazir
According to Muhammad Hassanudin and Habib Nazir, the term deposit is a term deposit from a third party at a bank where the withdrawal can only be done in accordance with a predetermined time period in accordance with the agreement between the third party and the Bank.
4. Banking Law
According to Banking Law No. 10 of 1998 article 1, the meaning of deposits is savings which withdrawals can only be made at certain times based on customer agreements with the Bank.
Also read: Understanding the Bank.
Characteristics of Deposit
This type of deposit can be identified by considering several of its characteristics. The characteristics of deposits are as follows:
1. Minimum Deposit
Similarly, if you want to open an account at a bank, there must be a minimum initial deposit given to the bank. Each bank has a different policy regarding the amount of this initial deposit. However, in general the minimum initial deposit for time deposits is around IDR 5 million.
2. Term of Deposit
As mentioned in the initial paragraph, savings deposits have a time period of deposition of funds, which starts from 1, 3, 6, 12, and 24 months. This means that the customer cannot withdraw funds at any time, but must be in accordance with the agreed deposit period with the Bank.
3. Funds Disbursement Rules
Still related to point # 2, customer funds cannot be disbursed at any time like ordinary savings. So, when a customer chooses a 24-month deposit period, the customer is required to wait 24 months in order to withdraw the deposit. If the customer wants to withdraw funds prematurely, he will be charged a penalty fee.
4. Deposit interest
In general, deposit rates are relatively higher compared to ordinary savings accounts. That is the reason why deposits include investment products because of the interest customers can benefit.
In determining the amount of deposit interest rates, the Bank must adjust to the policy of the Deposit Insurance Corporation (LPS).
5. Low Risk
Deposits are deposits as well as investments with low risk because they are guaranteed by LPS with special conditions.
6. Administrative Costs and Taxes
Deposits are taxable products so profits from deposit interest will be deducted for tax costs. In addition, customers are also subject to administrative costs. However, overall customers still benefit from these deposits.
7. Deposits Can Be Guaranteed
Deposits can be used as collateral when making loans to banks. However, only a few banks are willing to accept collateral in the form of deposits.
Also read: Definition of Stock.
Types of Deposit
In general, deposits can be divided into three types, namely Time Deposit, Certificate of Deposit, and Deposit on Call . The following is an explanation of each;
1. Time Deposit
Time deposits are types of deposits that have terms, ranging from 1, 2, 3, to 24 months. Time deposits are issued in the name of individuals or institutions.
Time deposit interest can be withdrawn every month according to the time period. Withdrawal of interest can be done in cash or non-cash (moving books).
These time deposits are generally issued in the form of a giro where the name of the owner is listed. That way, these deposits cannot be traded freely.
2. Certificate of Deposit
Certificate of deposit is a form of deposit issued by the Bank with a shorter period of time, which is 3 months, 6 months and 12 months. Generally these certificates of deposit are issued without the name of the owner or holder so that the owner can sell them.
3. Deposit on Call
Deposit on Call is a form of deposit used by deposit spreaders for depositors who have large funds and for a relatively short period of time these funds will not be used.
The time period is usually very short, which is 7 – 30 days. This form of deposit is issued with the name of the owner and cannot be traded.
Also read: Definition of Assets.
Benefits and benefits of deposit
Deposits have a variety of benefits for many parties, both in terms of banks, depositors, and the public who need capital. Referring to the definition of deposits above, the following are the benefits and advantages;
1. From the Bank’s Side
The benefits of deposits from the Bank’s side are support for the Bank’s efforts to raise funds from the public. The funds are used to increase banking business capital, particularly in the field of credit services by offering deposit rates.
2. From the depositor’s side
The benefit of deposits received by depositors is profits from higher interest rates. In addition, depositors also get credit guarantees and financial management assistance from the Bank.
3. From the Community’s Side
Benefits of deposits for the community is the existence of capital assistance funds in the form of credit. This capital can be used maximally in production activities so as to increase national income and public welfare.
Thus a concise explanation of the definition of deposits, characteristics, types, and benefits. Hopefully this article is useful and broadens your horizons.