Which of the following statements is/are correct with respect to deposits made in banks?

  1. ‘Time Deposits’ with banks, return higher rate of Interest when compared to ‘Demand deposits’
  2. Increase in ‘Time Deposits’ with banks tends to decrease liquidity in the market.

Select the correct option from the codes given below:

Answer: [C] Both 1 & 2

Both the statements are correct. When money is deposited for a fixed period, before which it cannot be withdrawn; such deposits are called “Time deposits” or “Term deposits”. The most common example of Time deposits is “Fixed Deposit“. On the other hand, if money deposited can be withdrawn by the customer (depositor / account holder) at any time without any advanced notice to banks; it is called demand deposit. Most common example of demand deposit is our Saving Banks Account, Current Bank Accounts etc

This question is a part of GKToday's Integrated IAS General Studies Module