SUPPLY OF MONEY Flashcards
What are Time Liabilities of a Bank?
Deposits that banks are not legally required to pay out to a customer before their maturity date, though early withdrawal may be possible with a penalty.
What are Demand Liabilities of a Bank?
Deposits that a customer can withdraw at any time without restrictions.
What is the difference between Time Liabilities and Demand Liabilities for a bank?
Time Liabilities are deposits with a fixed maturity date (e.g., fixed deposits). Demand liabilities are deposits that can be withdrawn at any time (e.g., current accounts).
Provide three examples of Time Liabilities of a bank.
Fixed Deposits
Cumulative/Recurring Deposits
Staff Security Deposits
Provide three examples of Demand Liabilities of a bank.
Current Accounts
Savings Accounts
Demand Drafts
What is CASA? Why is it important for banks?
CASA stands for Current Account Savings Account. It represents low-cost deposits for banks, increasing their profitability.
What happens to the money supply if people put more money into fixed deposits?
The immediate money supply decreases as money is locked in fixed deposits. However, banks can use these deposits for lending, eventually increasing the money supply.
Give 5 examples of Demand Liabilities.
- Current Account 2. Savings Account 3. Demand Draft 4. Overdue balance in Fixed Deposits 5. Unclaimed Deposits
Why might a bank prefer to have a higher proportion of Time Liabilities?
Time liabilities provide a more stable source of funding, as the bank knows the money is committed for a specific period. This allows for better planning and potentially longer-term investments.
A customer needs immediate access to their funds. Would a Time Liability or Demand Liability account be more suitable?
A Demand Liability account would be more suitable for immediate access to funds.
