1.4.2. Deposit Money Component

Deposit money or the bank money refers to the deposits held with the banks on the basis of which cheques could be drawn. Such deposits can be of two types:

♤ Demand deposits - They are payable by the bank on demand from the accountholder

♤ Time deposits - Other deposits, e.g. fixed deposits, have a fixed period to maturity and are referred to as time deposits.

However, a cheque is not a legal tender. A person can legally refuse to accept payment by cheques as there is no guarantee that a cheque will be honoured by the bank in case of insufficient deposits with it.