In banking, based on the context provided, STI refers to Short Term Investment accounts. The term appears in the context of closing such an account after settling an Inter-Corporate Deposit (ICD) facility, suggesting a link between these two financial instruments.
Understanding Short Term Investment (STI) Accounts
STI accounts are typically used for short-term parking of funds with the aim of earning some interest, even if it is for a brief duration. They usually offer higher liquidity compared to other investment options. These accounts may be associated with other financial instruments, like ICDs, which are loans provided by one company to another.
Key Characteristics of STI Accounts:
- Short-Term Horizon: Funds are typically held for a period ranging from a few days to a few months.
- Liquidity: Offers easy access to funds with minimal restrictions.
- Lower Risk: Generally considered less risky than long-term investments.
- Modest Returns: Yields are typically lower compared to longer-term, riskier investment instruments.
Example Scenario:
Imagine a company availing an Inter-Corporate Deposit (ICD). To ensure the repayment of the ICD, the lending bank might require the company to hold funds in a Short Term Investment (STI) Account. This ensures funds are available for settlement when the ICD matures. The provided text states, "If you have availed ICD against Deposits, you were informed to settle the ICD facility and close Short Term Investment (STI) Account," supporting this scenario.
Relationship between STI Accounts and ICDs
- Collateral or Security: STI accounts might act as a form of collateral or security for the ICD.
- Fund Parking: Funds designated for ICD repayment might temporarily reside in an STI account.
- Mandatory Account Closure: As per the provided context, upon the settlement of the ICD, the linked STI account is required to be closed.
| Feature | Short Term Investment (STI) Account |
|---|---|
| Time Horizon | Short (days to months) |
| Risk Level | Low |
| Liquidity | High |
| Return Rate | Moderate |
Conclusion
In the context of the given reference, Short Term Investment (STI) accounts in banking are primarily used for short-term parking of funds, often associated with other financial instruments like Inter-Corporate Deposits (ICDs). They offer liquidity and low risk, albeit with more modest returns compared to long-term investments. The provided reference highlights their use as a fund parking place associated with ICDs and mandatory closure upon the settlement of the linked ICD facility.
