TOPIC 7

Traditional
Banking
Products
TYPES OF DEPOSIT ACCOUNTS

1) Current Account Deposits

2) Saving Account Deposits
3) Fixed (Time) Deposits
4) Negotiable Certificate of Deposits (NCDs)
 Current Account
• A current account is a deposit account available
at all banking institutions in Malaysia and can be
used for either personal or business purposes.

• As a current account holder, you are allowed to

use cheques as a way to make payments.

• However do be sure that you are well informed

of the things you need to know about
using cheques before making any payments.
 Categories of Current Account
• Individual
• Joint
• Sole proprietors
• Partnership
• Companies
• Trustees
 General Requirements for
opening a Current Account
• Must be physically present at the bank
• Documents (for identification of the potential account
holder)
• Introducer (someone known to the bank)
• Initial deposit (as specified by the bank)
• Cheques (mode of payment for current account; need
to pay stamp duty for each leave of cheque)
 Current account features
• The product features also vary amongst
the banking institutions; e.g. some banking
institutions offer interest bearing current
accounts while some do not.
• Interest payment – generally, banks are
not allowed to pay interest on the credit
balance of a current account. (ABM rule B2.1
states that interest shall be allowed on the minimum balance of the
Government provided that such balance is not less than RM25,000)
 Current account features
• Current account holder receives a monthly
statement of account which will allow the
account-holder to check the transactions
taken place.
• The statement will not provide the most
current balance
• The account-holder should do bank
reconciliation to ensure all deposits and
withdrawals are accounted for.
 Current account -
specimen signature
• When you open a current account, your
banking institution will require you to
provide a specimen signature. This is for
the banking institution to compare your
signature on the cheques against the
specimen signature you have provided. If
the signature differs from the specimen
signature, your bank has the right to
decline your payment and will
return the cheque.
 Operating a Current Account
Your responsibilities as an account
holder: 
– Always keep your account numbers and PINs
that have been issued to you confidential
– Always keep your account statements in a
safe and secure place
– Always destroy or shred cancelled cheques  
– Immediately inform your banking institution of
any of the following
* Any change of address or telephone number
* Loss of cheque or cheque book
* Any discrepancy in your bank statement
 Operating a Current Account
As a current account holder among others, you will
be able to make:  
– Cheque payments  
– Cheque and cash deposits
– Account enquiries
–  Withdrawals
–  Funds transfer within the same banking
institution
–   Bill payments
–   Inter-bank transfers (GIRO)
 Interest on Current Account
Interest = Principal (P) x Time (t) x Rate (r)

Where

P = Minimum monthly balance of not less than

RM25,000
T= 1/12 or number of days in the month/365
 Savings Account
• A savings account enables you to save or
deposit your money into an account and receive
certain interest with no stated maturity. Available
at all the banking institutions in Malaysia,
interest earned on your balance is normally
credited to your account every month. The
minimum deposit to open an account varies from
one banking institution to another and can be as
low as RM1. You can withdraw or deposit money
into your savings account whenever you need.
 Categories of Savings Account
• Individual
• Joint (2 or more individuals) parties
• Societies, association and institutions
other than firms, corporation and other
business enterprises
• Minors
• Trustees
 Requirements for opening a
Savings Account
• Must be physically present at the bank
• Documents (for identification of the potential account
holder)
• Initial deposit (as specified by the bank)
• Passbook (record of transactions can be updated via machine
of over-the-counter)
 Savings Account
• Different banking institutions offer different
forms of savings account to cater to your
different needs.
• Some of these accounts may be subject to
fees and charges.
• Also, banking institutions may charge you if
you close your account within short period
after you have opened the account.
 Savings Account
• You can also apply for an ATM card with a specific PIN
number. This card allows you to withdraw money from
the on-branch and off-branch ATMs of the banking
institution as well as perform various other transactions.

• To keep track of your banking transactions and interest

earned, you can choose to receive either a passbook or
a statement. You will need to use your passbook for over
the counter transactions. However, some banking
institutions allow over the counter transactions with only
your ATM card and identity card.
 Savings Account
• Some of the common transactions you can
perform as an account holder are: 
– Withdraw money, either over the counter or from ATMs

– Deposit money, either over the counter or through

mechanism such as cash deposit machines
– Make account enquiries
– Transfer funds within the same banking institution
– Bill payments
– Inter-bank transfers (GIRO)
– Online banking for banking institutions that has this
feature
 Interest on Savings Account
• Simple interest formula
Interest = Principal (P) x Time (t) x Rate (r)
• Some bank quote more than one interest rate:
(a) Multi-interest rates
- Different interest rates are paid to different
amount of deposits.
(b) Multi-tier interest rates
- An account will be paid multiple interest
rates based on the balance in the account.
 Time Deposits
• An account that earns interest at an
agreed rate, based on the sum of money
you deposit for a specific period of time.
The period of deposits covers 1 to 60
months.
• Features and benefits:
– Pay higher interest than savings account.
– Protect from interest rate fluctuations.
 Time Deposits

Eligibility

• Individual
• Joint
• Sole proprietors
• Partnership
• Companies/societies
 Time Deposits
• Interest payment – banks must display the
interest rates payable fr 1 to 12 months.
• For more than 12 months, the rates
payable are negotiable
• Minimum Deposit Placement for one-
month FD – RM5,000
 Interest on Time Deposits
Interest = Principal (P) x Time (T) x Rate (r)
365 x 100
Where:
P = Amount of deposit
T= Period from date of deposit to maturity (in
number of days)
 Interest on Time Deposits
A time deposit of RM80,000 is placed on 25/1/2000 at
4.5%p.a for a month. (25/1/2000 – 24/2/2000)
Interest = RM80,000 x 4.5 x 31
365 x 100
= RM305.75

On 25/2/2000, if the time deposit and interest rolled over

for another month at 4.75%p.a, the interest will be:
Interest = RM80,305.75 x 4.75 x 29
365 x 100
= RM303.07
 Negotiable Certificates of
Deposits (NCDs)
• NCDs are an instrument to acknowledge a
negotiable fixed deposit that can be sold off for
cash before maturity (very liquid instrument) .
• Four types:
– Short-term NCDs
– Long-term NCDs
– Zero-coupon NCDs
– Floating Rate NCDs
 Negotiable Certificates of
Deposits (NCDs)
• NCDs are introduced to encourage long-term
deposits by large depositors.
• Denominated in multiple of RM50,000 up to a
maximum of RM10 million per certificate.
• NCDs are bearer certificates and kept with
authorized depository (financial institutions).
• Depositors, through the authorized financial
institutions, can trade the NCDs (outright or repo
basis).
 Other traditional
banking products & services
• Banker’s cheques (cashier’s order) – a RM
instrument
• Demand draft (local DD in RM; outward
DD in foreign currency)
• Telegraphic transfer (local TT in RM; TT in
foreign currency) – fast mode of payment
• Mail transfer – similar to TT, instead of
transmitting message by telex, fax or
SWIFT, it is sent through mail.