BankMania

06/03/2017

Reverse Mortgage Loan - Salient features

The scheme was introduced in India in 2007 and made applicable with effect from April 01, 2008.
Banks like State Bank of India, Central Bank of India etc have issued guidelines under RML. The basic
guidelines regarding the scheme have been framed by National Housing Bank, a subsidiary of Reserve
Bank of India; the details of which are available on the website of NHB. The salient features of the
scheme are briefly elucidated below:

• A senior citizen who is above 60 years is eligible for a reverse mortgage loan against his own and
• self occupied residential property. He / She can continue to occupy the house. The borrower will not be called upon to service the loan during his / her lifetime. The loan amount may be used by the borrower for varied purposes including up-gradation/ renovation of residential property, medical exigencies, etc. However, use of RML for speculative, trading and business purposes is not permissible.
• Married couples will be eligible as joint borrowers subject to the condition that one of them is above 60 years and the other not below 55 years.
• The property should have a clear title and should be free from encumbrances. The residual life of
the property should be at least 20 years.
• RML is not available against the security of commercial property.
• The owner of the residential property and his/her spouse are generally joint borrowers and the
• surviving borrower is allowed to retain the property till his / her death.
• The loan amount will be based upon the market value of the property and could range from 60% to 90% of the value of the property depending on the age of the borrower (s); with the interest rate being market driven.
• The loan installments could be paid through monthly/quarterly/half-yearly/annual disbursements or a lump-sum or as a committed line of credit or as a combination of the three. As per the guidelines, the maximum monthly payment is pegged at Rs. 50,000.00 p.m. with the maximum lump sum payment being restricted to 50% of the eligible loan amount subject to a limit of Rs. 15 lakhs, to be used for medical treatment. The balance loan amount would be paid periodically.
• The maximum period of the loan is 15 years. If the borrower outlives the maximum loan period, he/ she can continue to retain the property and need not repay the loan or service the interest. However, the periodic payments under Reverse Mortgage will cease and interest will continue to accrue till the death of the borrower or till he / she moves out of the property. In such an eventuality, the loan will be liquidated from the sale proceeds of the property.
• The usual charges in regard to the appraisal fee, documentation charges, etc. have to be borne by the borrowers. The borrower is required to insure the property at his own cost and is also liable to pay the taxes and statutory charges to the authorities concerned regularly.
• The banker (lender) is free to decide the periodicity of valuing the property with such valuation
being at least once every five years. The quantum of loan may undergo revisions based on such revaluation of property at the discretion of the lender.
• All reverse mortgage loan products are expected to carry a ‘no negative equity’ or ‘non-recourse’
• guarantee. In simple words, this means that the borrower(s) will never owe more than the net realizable value of their property, provided the terms and conditions of the loan have been met.
• The borrower(s)/legal heir(s) can also repay the loan with accumulated interest and have the mortgage released without resorting to sale of the property. No charges will be levied if the loan is prepaid.

Formula to Calculate the Periodic Payments under RML
The formula to calculate the periodic payments, as available in the website of NHB, is as under:
Installment Amount = (PV*LTVR*I)/ ((1+I)n-1)
Where, PV = Property Value;
LTVR = LTV Ratio;
n = No. of Installment Payments;
I = the value of I will depend on Disbursement Frequency selected.

06/03/2017

Unified Payments Interface (UPI)

Unified Payments Interface (UPI) is a system that powers multiple bank accounts into a single mobile application (of any participating bank), merging several banking features, seamless fund routing & merchant payments into one hood. It also caters to the “Peer to Peer” collect request which can be scheduled and paid as per requirement and convenience.

With the above context in mind, NPCI conducted a pilot launch with 21 member banks. The pilot launch was on 11th April 2016 by Dr. Raghuram G Rajan, Governor, RBI at Mumbai. Banks have started to upload their UPI enabled Apps on Google Play store from 25th August, 2016 onwards.
How is it unique?

Immediate money transfer through mobile device round the clock 24*7 and 365 days.
Single mobile application for accessing different bank accounts
Single Click 2 Factor Authentication – Aligned with the Regulatory guidelines, yet provides for a very strong feature of seamless single click payment.

Virtual address of the customer for Pull & Push provides for incremental security with the customer not required to enter the details such as Card no, Account number; IFSC etc.

Bill Sharing with friends.

Best answer to Cash on Delivery hassle, running to an ATM or rendering exact amount.

Merchant Payment with Single Application or In-App Payments.
Scheduling PUSH and PULL Payments for various purposes.
Utility Bill Payments, Over the Counter Payments, Barcode (Scan and Pay) based payments.

Donations, Collections, Disbursements Scalable.
Raising Complaint from Mobile App directly.

Participants in UPI
Payer PSP
Payee PSP
Remitter Bank
Beneficiary Bank
NPCI
Bank Account holders
Merchants

UPI - Benefits to the Ecosystem participants
Benefits for banks:

Single click Two Factor authentication
Universal Application for transaction
Leveraging existing infrastructure
Safer, Secured and Innovative
Payment basis Single/ Unique Identifier
Enable seamless merchant transactions
Benefits for end Customers:

Round the clock availability
Single Application for accessing different bank accounts
Use of Virtual ID is more secure, no credential sharing
Single click authentication
Raise Complaint from Mobile App directly
Benefits for Merchants:

Seamless fund collection from customers - single identifiers
No risk of storing customer’s virtual address like in Cards
Tap customers not having credit/debit cards
Suitable for e-Com & m-Com transaction
Resolves the COD collection problem
Single click 2FA facility to the customer - seamless Pull
In-App Payments (IAP)

Registration in UPI enabled application
Steps for Registration:

User downloads the UPI application from the App Store / Banks website
User creates his/ her profile by entering details like name, virtual id (payment address), password etc.
User goes to “Add/Link/Manage Bank Account” option and links the bank and account number with the virtual id
Generating M – PIN:

User selects the bank account from which he/she wants to initiate the transaction
User clicks one of the option -

a. Mobile Banking Registration/Generate MPIN

b. Change M-PIN

In the case of 3(a) -

User receives OTP from the Issuer bank on his/her registered mobile number
User now enters last 6 digits of Debit card number and expiry date
User enters OTP and enters his preferred numeric MPIN (MPIN that he would like to set) and clicks on Submit
After clicking submit, customer gets notification (successful or decline)

In case of 2(b) –

User enters his old MPIN and preferred new MPIN (MPIN that he would like to set) and clicks on Submit
After clicking submit, customer gets notification (successful or failure)

Performing a UPI Transaction:

A. PUSH – sending money using virtual address

User logs in to UPI application
After successful login, user selects the option of Send Money / Payment
User enters beneficiary’s / Payee virtual id, amount and selects account to be debited
User gets confirmation screen to review the payment details and clicks on Confirm
User now enters MPIN
User gets successful or failure message

PULL – Requesting money:

User logs in to his bank’s UPI application
After successful login, user selects the option of collect money (request for payment)

User enters remitters / payers virtual id, amount and account to be credited User gets confirmation screen to review the payment details and clicks on confirm
The payer will get the notification on his mobile for request money
Payer now clicks on the notification and opens his banks UPI app where he reviews payment request Payer then decides to click on accept or decline In case of accept payment, payer will enter MPIN to authorize the transaction
Transaction complete, payer gets successful or decline transaction notification Payee / requester gets notification and SMS from bank for credit of his bank account

06/03/2017

Education Loans for Vocational Courses

Eligibility – In order to be eligible to obtain education loan for vocational courses you need to fulfill the following eligibility.
The first criteria for obtaining education loan for vocational courses is that you should be enrolled in a course that has received recognition by state government or central government and your course should pave way for a certificate, degree or diploma. The course should be such that would lead to employment after the tenure.

You need to be an Indian National who has cleared the 10th standard examination.

The tenure of the course may be of 2-3 months to 3 years.

Expenses Covered – The expenses that get covered within the frame of education loan for vocational courses are as follows –
Tuition fees or Course Fees
Charges for the purchase of books, equipments and instruments
Examination fees
Laboratory fees
Caution money
Library fees

Any other expenses that are required to complete the course.
Loan Amount/Quantum of Finance – The loan amount that can be sanctioned to you under the head of education loan for vocational courses varies from bank to bank and course to course. Banks, however, are willing to lend an amount ranging from Rs 50,000 to Rs 1,50,000.
Courses up to 3 months – Rs 20,000
Courses ranging from 3 months to 6 months – Rs 50,000
Courses ranging from 6 months to 1 year – Rs 75,000
Courses above 1 year duration – Rs 1,50,000

Age Criterion – If you wish to apply for education loan for vocational courses there is no age restriction as such. In the case where the student is minor the documentation for loan is executed by the parents/guardian and a letter of ratification is obtained by the bank once the student attains majority.

Interest Rates – The interest rates for education loan for vocational courses also vary from bank to bank. Majority banks charge interest rates falling in the slab of 12 percent to 13.75 percent.
Security Requirement – While you opt for an education loan for vocational course you need to provide a collateral security or a guarantor. Banks, however, prefer the parents/guardians to be the co-borrower.

Moratorium Period – This is the period post completion of the course after which the repayment of the loan amount would begin.
Courses up to 1 year – 6 months from the completion of course
Courses above 1 year – 12 months from the completion of the course.

Repayment of Loan – Majority of the banks and financial institutions prefer to give education loan for vocational courses to be repaid on Equated Monthly Installments (EMIs). For course whose tenure is up to 1 year, the repayment needs to be made within a maximum of 3-5 years after completion of the course. For courses that have tenure of more than 1 year, the repayment needs to be made within a maximum of 5-7 years.

Processing Fees – There is no processing fee charged to you for vocational education loan.

Insurance – This is left to the requirement of the borrower.
Prepayment of Loan – You are entitled to repay the loan immediately after the commencement of repayment and you will not have to pay any prepayment charges.

06/03/2017

EDUCATION LOAN SCHEME:
1. Education loan scheme is a model scheme of IBA having RBI approval. As per the scheme:
2. Max Loan amount - Education in India Rs.20 lac. Abroad Rs.20 lac.
3. Margin- Up to Rs.4 lac--------------------------------------- : Nil. Above Rs.4 lac for education in India ----------5% and Abroad 15%.
4. RoI–
 Simple Interest during course and moratorium
 1% interest concession if interest is serviced during study period
 0.50% interest concession is applicable for girl students.
 Interest between BR+1.50% to BR+3.00%
5. Moratoriumperiod: Period of studies + (one year or 6 months of getting job, whichever is earlier).
6. Repaymentperiod:
 For loans up to Rs.7.5 Lac ---------------------------Up to 10 years
 For loans above Rs.7.5 Lac ----------up to 15 years5 to 7 years.
7. Security:
 Parents to be co-borrower for each loan
 Loan up to Rs.4 lac---------: no collateral / 3rd party guarantee.
 Loan above Rs.4 lac up to Rs.7.50 lac----: 3rd party guarantee
 Loan above Rs.7.50 lac------: Collateral such as mortgage etc.

06/03/2017

Deduction of Interest on Housing Loan – Sec 24b
Applicable for financial year 2015-16 and 2016-17

Section 24 of the income tax act provides deduction in respect of home loan interest.

Important points
1) Interest on housing loan is allowable as deduction on accrual basis not on paid basis (even if account books are kept on cash basis) if capital is borrowed for the purpose of purchase, construction, repair, renewal or reconstruction of the house property. Deduction can be claimed for two or more housing loans.

2)Interest includes service fees, brokerage, commission, prepayment charges etc.

3)Interest/penalty on unpaid interest shall not be allowed as deduction.

4)Deduction shall be allowed irrespective of the nature of loan whether it is housing loan or personal loan from any person/institution.

5) If a person instead of raising a loan from a third party pays sale price to the seller in instalments along with interest than such interest is also allowable.

6) Interest on borrowed money which is payable outside India shall not be allowed as deduction under section 24(b), unless the tax on the same has been paid or deducted at source and in respect of which there is no person in India, who may be treated as an agent of the recipient for such purpose.

7) For claiming deduction under this section, assessee must be the owner or deemed owner of the house property and loan shall be in the assessee name.

Maximum Limit of deduction under section 24b

These limits of deduction is applicable assessee wise and not property wise. Therefore if an assessee owns two or more house property then the total deduction for that assessee remain same.

1) In Let Out Property/Deemed to be Let Out – No maximum limit

2) Self Occupied House (SOP) – Rs. 2,00,000. (1,50,000 for A.y 2014-15 and before)

In the following cases the above limit of Rs 2,00,000 for SOP shall be reduced to Rs. 30,000

– Loan borrowed before 01-04-1999 for any purpose related to house property.

– Loan borrowed after 01-04-1999 for any purpose other than construction or acquisition.

– If construction/acquisition is not completed within 5 years from the end of the financial year (3 years till financial year 2015-16) in which capital was borrowed. For example, a loan is obtained for construction/acquisition on 28 Oct 2011 then the deduction limit should reduced to Rs 30,000 if the construction / acquisition completes after 31 March 2017.
Interest for pre construction/acquisition period Interest for pre construction/acquisition period is allowable in 5 equal instalment beginning from the year of completion of house property. This deduction is not allowable if the loan is utilized for repairs, renewal or reconstruction.

Pre Construction/Acquisition period starts from the date of borrowing and ends on the last day of preceding Financial Year in which the construction is completed. For example, if house property is completed on 21st March 2012 then the deduction is allowed from Financial Year 2011-2012 to 2015-16.

Example
Loan Taken on 01-05-2006 of Rs. 5,00,000

Construction End on 07-09-2012.

Pre Construction/Acquisition Period = 01-05-2006 to 31-03-2012

Pre Construction/Acquisition Interest = Rs 3,55,000 ( Rs 5,00,000*71 Months*1%)

Pre Construction/Acquisition Interest Deduction for Financial Year 2012-13 to 2016-17 assuming let out property or deemed to be let out = Rs 71,000 per year ( 3,55,000/5 )

Pre Construction/Acquisition Interest Deduction for Financial Year 2012-13 to 2016-17 assuming SOP = Rs 71,000 per year ( 355000/5 ) (as the construction is completed within 5 years from the end of the financial year in which capital was borrowed)

Interest from 01-04-2012 to 31-03-2013 shall be allowed as deduction in 2012-13 as current year’s interest. Interest from 01-04-2012 to 07-09-2012 shall not be considered as Pre Acquisition/Construction Period.
Note: – If a property is partly SOP and partly let out then also the limit of Rs 2,00,000/30,000 shall be available for SOP portion and there is no limit of deduction for let out portion even if the construction is completed after 3 years.

14/07/2014

25/03/2014

Q. The Main function of SEBI is:
(a) to protect the interest of investors in securities
(b) to promote the development of the securities market
(c) to regulate securities market
(d) all the above
Ans: ?

25/03/2014

Securitisation is a process of acquring the loans classified as
1) bookdebts
2) performing debts
3)bad debts
4)non performing

25/03/2014

When a bank lends money to the corporate person the relationship is:
(a) borrower and lender
(b) creditor-debtor
(c) debtor-creditor
(d) customer and client
Ans: ?

25/03/2014

Q. In a bank guarantee, the number of parties involved in the agreement are:
(a) three
(b) two
(c) many
(d) one
Ans: ?

25/03/2014

Q. Bank Guarantees are issued by:
(a) any bank
(b) only specified banks
(c) only banks permitted to do this type of business
(d) none
Ans: ?