LEARNING OUTCOME 3

HANDLING DEPOSITS ACCURATELY AND SECURELY

An Introduction to Deposits

What's the Big Idea?

What is a bank's most important raw material? It's not fancy buildings or fast computers. A bank's most important raw material is money. But where does a bank get this money from? It doesn't print it. A bank gets the money it needs to operate by having people and businesses place their funds with it for safekeeping. This act of placing money into a bank account is called a deposit.

Deposits are the lifeblood of any bank. They are the foundation of the entire banking system. When a farmer in Macheke deposits the earnings from his tobacco sales, or a teacher in Gweru deposits her monthly salary, they are not just keeping their money safe. They are providing the bank with the funds that it can then use to grant loans to other customers—like a family wanting to buy a house or a new business needing startup capital.

Handling these deposits is therefore the most fundamental and critical function you will perform as a banking assistant. Every deposit, whether it is a few dollars from a student or millions from a large corporation, must be handled with 100% accuracy and integrity. Understanding what a deposit is and why it is so critically important to the bank is the first step in mastering this essential daily task.

Key Vocabulary

• Deposit: The act of placing funds (cash, cheques, or electronic transfers) into a bank account. It also refers to the sum of money itself.
• Liability (for a bank): A sum of money that the bank owes. Customer deposits are the bank's biggest liability because it is the customers' money, and the bank is obligated to give it back on demand.
• Asset (for a bank): A resource with economic value that a bank owns. Loans are a bank's biggest asset because they generate income for the bank through interest.
• Financial Intermediation: The primary process of a bank, which involves taking deposits from those with surplus money (savers) and lending it to those who need money (borrowers).

The Core Concepts Explained

1. Defining a Deposit

   A deposit is a transaction involving the transfer of funds to another party for safekeeping. In the context of banking, it refers to the act of a customer placing money into their account at a financial institution. This can be done in several ways:

   • Cash Deposit: Physically handing over notes and coins to a teller.
   • Cheque Deposit: Handing over a cheque written by someone else for the funds to be credited to your account.
   • Electronic Deposit: Receiving money through a direct transfer, such as a salary payment from an employer, a ZIPIT transfer, or an RTGS payment.

   Once the money is in the account, it represents a balance that is owed to the customer by the bank.

2. The Importance of Deposits for Banks

   Deposits are not just idle cash for a bank; they are the essential fuel that powers its entire business model. The importance of deposits can be explained through several key points:

   • Deposits are the Primary Source of Funds for Lending: This is the most important function. Banks operate through a process called financial intermediation. They gather deposits from customers who have excess funds (savers) and then lend this pooled money to other customers who need funds (borrowers). Without a stable base of deposits, the bank would have no money to lend out for mortgages, car loans, or business loans.
   • Deposits Generate Revenue for the Bank: The bank's main source of profit is the interest rate spread. This is the difference between the interest rate the bank pays to customers on their savings deposits and the much higher interest rate it charges customers on their loans. A larger pool of deposits allows the bank to make more loans, thereby generating more revenue from this spread.
   • Deposits Form the Foundation of Customer Relationships: The deposit account is usually the first and most fundamental product a customer has with a bank. It is the anchor of the relationship. A customer who has a deposit account with a bank is far more likely to turn to that same bank for other services, such as loans, insurance, or investment advice.
   • They Provide Liquidity and Stability: A strong and stable base of deposits ensures that the bank has enough cash on hand (liquidity) to meet the daily withdrawal demands of its customers and to operate smoothly. A bank that is losing depositors is a bank that is in serious trouble.
   • Deposits can be a Low-Cost Source of Funds: While banks pay interest on savings deposits, the interest they pay is relatively low. Furthermore, money held in current accounts often earns no interest at all. This makes customer deposits a much cheaper source of funds for the bank compared to borrowing money from other banks or from the central bank (the RBZ).

Example: "Putting it to Work in Zimbabwe"

Scenario: Let's trace the journey of a single deposit through a simplified Zimbabwean bank.

• Step 1: The Deposit: Amai Moyo, who runs a successful poultry business in Chitungwiza, deposits $2,000 USD in cash into her Corporate Account at a local bank branch. For Amai Moyo, this is her hard-earned revenue. For the bank, this $2,000 is now a liability (they owe it to her).
• Step 2: Financial Intermediation: The bank now has Amai Moyo's $2,000. At the same time, a young university graduate, Tanaka, applies for a $1,500 USD loan to buy a laptop to start a small graphic design business.
• Step 3: Lending: The bank uses a portion of the funds it holds from depositors like Amai Moyo to grant the loan to Tanaka. The $1,500 loan is now an asset for the bank, as Tanaka will pay it back with interest.
• Step 4: Generating Profit: The bank might pay Amai Moyo 2% interest per year on her business account balance. However, it might charge Tanaka 20% interest per year on his loan. The difference between the interest paid out and the interest received is the bank's profit, which is made possible entirely by the initial deposit.

Conclusion: This simple example shows that Amai Moyo's deposit was not just stored in a vault. It was put to work, allowing Tanaka to start a business and enabling the bank to perform its core economic function and make a profit.

Common Mistakes to Avoid

• Thinking Deposits are the Bank's Money: A common misconception is that once money is deposited, it "belongs" to the bank. It always remains the customer's money; the bank is merely safeguarding it and has a legal obligation to return it.
• Underestimating the Importance of Small Deposits: Believing that only large corporate deposits matter. In reality, the combined total of thousands of small, stable savings and current account deposits from individuals forms the most reliable and important funding base for most retail banks.

Institutions Authorised to Accept Deposits

What's the Big Idea?

If you have money to save, you can't just walk into any company and ask them to keep it for you. You wouldn't give your salary to a supermarket like OK Zimbabwe or a mobile company like Econet for safekeeping, because they are not set up for that purpose. The act of taking deposits from the public is a special, highly regulated activity. Only certain types of companies, which we call "financial institutions," are given a special license by the country's central bank to do this.

In Zimbabwe, the authority that grants these licenses and supervises these institutions is the Reserve Bank of Zimbabwe (RBZ). The RBZ puts in place very strict rules to ensure that any institution taking deposits is stable, secure, and well-managed. This is done to protect your money and to maintain the stability of the entire financial system.

Key Vocabulary

• Financial Institution: A company engaged in the business of dealing with financial and monetary transactions such as deposits, loans, investments, and currency exchange.
• Reserve Bank of Zimbabwe (RBZ): The central bank of Zimbabwe, responsible for monetary policy, printing money, and, crucially, licensing and regulating all deposit-taking institutions.
• Deposit-Taking Institution: A financial institution that is legally licensed by the RBZ to accept monetary deposits from the public.
• Commercial Bank: A type of financial institution that provides a wide range of services, including accepting deposits, making loans, and processing transactions for the general public and for businesses.
• Microfinance Bank: A specialised bank that provides financial services, including small loans (microcredit) and deposits, to low-income individuals and small businesses.

Types of Deposit-Taking Institutions in Zimbabwe

1. Commercial Banks: These are the largest and most common type. They offer the widest range of services to all types of customers. Examples: CBZ Bank, Stanbic Bank, FBC Bank.
2. Building Societies: Specialised institutions originally created to provide mortgages (home loans), but now offer a wide range of services. Examples: CABS, FBC Building Society.
3. The People's Own Savings Bank (POSB): A state-owned savings bank with a mandate to encourage saving among the general population, with a wide rural network.
4. Microfinance Banks (Deposit-Taking): These focus on the lower-income segment and the informal sector. Only those with a special RBZ license can accept deposits. Examples: EmpowerBank, African Century Limited.
5. Savings and Credit Co-operative Societies (SACCOS): Member-owned institutions formed by a group with a common bond, pooling savings to provide loans back to members.

The Deposit Acceptance Process

What's the Big Idea?

The process of accepting a deposit at a bank is critical because you are handling a customer's savings, their salary, or their business's revenue. There is zero room for error. The deposit acceptance process is a sequence of standardised steps that every bank teller must follow for every single deposit. This strict procedure is designed to ensure accuracy, prevent fraud, maintain a clear audit trail, and guarantee that the customer's account is credited with the exact right amount. Mastering this process is the most fundamental practical skill of a bank teller.

Key Vocabulary

• Deposit Slip: A small, written form that a customer must fill out when making a deposit.
• Credit (a transaction): To add money to a bank account.
• Debit (a transaction): To remove money from a bank account.
• Audit Trail: A step-by-step record of all transactions.
• Verification: The process of checking or proving that something is accurate and true.

The Step-by-Step Process

1. Receive and Greet the Customer: Professionally greet the customer and request the completed deposit slip.
2. Verify the Deposit Slip: Check the date, account number, name, and total amount. Ensure figures match the amount in words.
3. Count and Verify the Cash: Count all cash carefully in full view of the customer, ideally twice. Check for counterfeit notes.
4. Inspect and Verify the Cheques: Check each cheque for the date (not post-dated or stale), matching amounts (words/figures), signature, and correct payee name.
5. Process the Transaction in the Banking System: Carefully enter the account number and amounts into the computer system and double-check before finalising.
6. Stamp the Deposit Slip and Provide a Receipt: Stamp all copies of the deposit slip. Give one stamped copy to the customer as their official receipt.
7. Secure the Funds: Immediately place the cash and cheques into your secure teller drawer according to bank procedures.

Customer Information Required When Making a Deposit

What's the Big Idea?

A customer cannot simply hand a teller a bundle of cash and expect it to arrive in the right account. To initiate the transaction, the customer must provide a clear set of instructions on a deposit slip. The information required on this slip is the "address" for the money. It provides the critical data the bank needs to execute the transaction accurately and to create a formal, legal record of it.

Key Information on a Deposit Slip

1. Account Holder's Name: The full, official name of the account, which must match the account number.
2. Account Number: The single most important piece of information; the unique address for the funds.
3. The Date of the Transaction: Essential for record-keeping and creating a clear audit trail.
4. The Breakdown and Total Amount: Separate lines for cash and cheques, a grand total, and the total amount written in words as a security feature.
5. Name and Signature of the Depositor: The person physically making the deposit, which is important for the audit trail if a query arises.

Precautions to be Taken When Accepting Deposits

What's the Big Idea?

As a teller, you are the guardian of both the customer's money and the bank's integrity. You must handle every transaction with a set of careful precautions designed to prevent errors, stop fraud, and ensure the security of the funds. These are not optional steps; they are a core part of your responsibility.

Key Precautions for Tellers

1. Count and Verify Cash in Full View of the Customer: This is the most essential precaution to prevent disputes. Always count twice.
2. Scrutinise all Cheques and Cash for Authenticity: Be the bank's first defence against fraud by checking for counterfeit notes and invalid or altered cheques.
3. Verify All Details on the Deposit Slip Against the System: Cross-check that the account name written on the slip matches the account number in the bank's system before processing.
4. Exercise Enhanced Due Diligence on Large or Unusual Deposits: Follow bank policy for large cash deposits to help prevent money laundering. This may involve asking for the source of funds and notifying a supervisor.
5. Maintain a Secure and Organized Workstation: Secure all funds in a locked drawer immediately after a transaction and keep your workspace tidy to prevent loss or misplacement.