What do you understand by demand deposits?
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A demand deposit account (DDA) is a bank account from which deposited funds can be withdrawn at any time, without advance notice. DDA accounts can pay interest on the deposited funds but aren't required to.
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To ensure safety of their money, people deposit their money with banks. Banks accept deposits and pay interest on deposits. People have the provision to withdraw their money as and when they require. Since money can be withdrawn on demand, these deposits are known as demand deposits.
Features
- A demand deposit has the essential characteristic of money. It can be used as a medium of exchange.
- The facility of cheques against demand deposits makes it possible to make payments, without using cash.
- Since demand deposits are accepted widely as a means of payment along with currency, they constitute money in the modem economy.
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