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28. Immediate credit is usually provided for outstation collections up to Rs 20000/- for accounts that
are satisfactorily conducted.
29. Banks will pay interest for delays in collection of outstation cheques.
30. mandatory PAN (Permanent Account Number) details are required to be furnished for doing cash
transactions exceeding र 50,000.
33. Banks offer various other facilities/services with these accounts like ATM cards, ATM-cum-Debit
cards, Credit cards, Online or Internet banking etc.
Individual 15 G or 15H
Trusts 15AA
15H/15AA Forms are valid only for the particular financial year in which they are issued.
For any TDS deducted by the bank, it will issue a Form 16A which can be used while filing the
income tax returns. Such TDS is also reflected in the AS26 form which can be generated from
income tax website.
(G) Thus, in case you do not want the TDS to be deducted, you can split your Bank Deposits in two or more
Banks so that the total interest earned at one Bank is less than Rs.10,000/-.
Difference between form 15G and 15H A person who is below 65 years can file the Form 15 G . However,
only a person of 65 years or more is eligible to file Form 15 H.
Difference between Form 60 and Form 61
FORM NO. 60 : Form of declaration to be filed by a person who does not have a permanent
account number or General Index Register Number
FORM NO. 61: Form of declaration to be filed by a person who has agricultural income
RISK IN BANK DEPOSITS - DICGC COVER
At present Banks are compulsorily required to get their deposits insured from Deposit Insurance
and Credit Guarantee Corporation (DICGC).
However, DICGC at present insures deposits only upto Rs.1 lakh.
Thus, deposits in banks upto Rs.1 lakhs are safe and secure from the default by the bank.
The type of deposits insured by DICGC are savings, fixed, current and recurring deposits.
However, deposits kept in different branches of a bank will be bunched together for the purpose of
insurance cover.
However, deposits with different banks are insured separately
TIPS FOR LOANS AGAINST BANK DEPOSITS
Banks usually allow you loan upto 75% of the total deposit PLUS the interest earned
till date of sanction of loan.
However, now many banks have allowed higher percentage of loans which have
shorter maturities.
Banks usually charge 2% more than the interest payable on the deposits against
which the loan is sought
BANK DEPOSITS VS. OTHER INVESTMENTS
BANK DEPOSITS OTHER INVESTMENTS
Investments in equities, company deposits, debentures,
Bank deposits are one of the safest
mutual funds etc. are more risky. However, investments
investments and risk of default is
in RBI Bonds, PPF, Government Securities are even more
minimal
safe.
The returns from equities, mutual funds is not assured.
Banks deposits give an almost The company deposits and debentures may stop
assured, fixed and uninterrupted servicing of interest any time due to losses. However,
returns investments in RBI bonds, PPF, Government securities
give assured returns.
It is easy to choose a deposit
scheme at a Bank as they are The investments in equities and mutual funds is much
simple and can be understood by a more complicated and complex for a layman.
layman
There are no rebates available
under Income Tax for deposits in Deposits in schemes like NSC, PPF, Infrastructure bonds
Banks, except under special allows rebates in Income Tax.
schemes now floated by Banks
Global economic slowdown and its impact on the financial services industry in India
1. tightening in lending standards,
2. deterioration in asset quality
3. deceleration in consumer loan demand
4. direct slowdown in employment and growth
5. Terms-of-trade losses due to soaring commodity prices
Credit Information Bureau (India) Limited (CIBIL)
over 500 Members
The Credit Information Companies (Regulation) Act, 2005 has empowered CIBIL to collect the data
from various types of credit grantors (i.e. lenders). and then share the same within the group
without obtaining borrower consent
CIBIL caters to both company and individuals
CIBIL's equity was held by State Bank of India and Housing Development Finance Corporation
Limited. The shareholding pattern has now been diversified
A Credit Information Report (CIR) is a factual record of a borrower's credit payment history. Its
purpose is to help credit grantors make informed lending decisions - quickly and objectively.
Rules allow consumers to purchase their "CIBIL TransUnion Score" directly from CIBIL.
TransUnion Score helps the consumers to assess their credit history better and enable them to 'see
themselves as lenders do.
The score is provided along with the CIBIL Credit Information Report (CIR).
The TransUnion Score is a three-digit numeric summary (ranging from 300 to 900)
The closer the score is to 900, the more confidence the credit institution will have in the individual's
ability to repay the loan and hence, the better the chances of his application getting approved.
Is CIBIL a list of defaulters? No. It is an indicator of the credit-worthiness of a customer.
Details of liability accounts such as savings, fixed deposits and recurring deposits are not sent to
CIBIL.
CIBIL only reports loan and credit-card information such as repayment track, loan type, amount
outstanding, loan amount disbursed, various dates, etc. The report also contains a customer's
personal information like name, address, date of birth, phone number(s), passport number, voter's
ID number, PAN, etc.
The credit report does not provide any opinion or comment on whether a loan should be extended
to a customer
A customer's name cannot be removed from CIBIL's database
If a customer's family member has defaulted, will it affect the customer's status in CIBIL's records?
No
Pledge vs Hypothecation vs Mortgage
These terms are used for creating a charge on the assets which is given by the borrower to the lender as a
security for any loan.
Pledge
1. It is used when the lender (pledgee) takes actual possession of assets.
2. Such securities or goods are movable securities.
3. In case there is default by the borrower, the pledgee has a right to sell the goods in his possession
and adjust its proceeds towards the amount due (i.e. principal and interest amount).
4. Some examples of pledge are Gold /Jewellery Loans, Advance against goods/stock, advances
against National Saving Certificates etc.
Hypothecation
1. used for creating charge against the security of movable assets,
2. but here the possession of the security remains with the borrower itself.
3. in case of default by the borrower, the lender will have to first take possession of the security and
then sell the same.
4. The best example of this type of arrangement are Car Loans
Mortgage
1. used for creating charge against immovable property which includes land
2. The best example is when someone takes a Housing Loan / Home Loan.
3. In this case house is mortgaged in favour of the bank / financer but remains in possession of the
borrower
Difference Between Pledge, Hypothecation and Mortgage at a Glance:
Pledge Hypothecation Mortgage
Type of Security Movable Movable Immovable
Usually
Possession of Remains with lender Remains with Remains
the security (pledgee) Borrower with
Borrower
What is an Assignment ?
1. Assignment occurs when the owner of a contract, known as the assignor, gives a contract to another
party, known as the assignee.
2. The assignee assumes all responsibilities and benefits of the contract.
3. One example is when life insurance policy is used as a collateral for a loan
Wilful Defaulters – RBI Guidelines for Banks
A "wilful default"is
(a) The unit has defaulted in meeting its payment / repayment obligations to the lender even when it has
the capacity to honour the said obligations.
b. diverted the funds for other purposes.
c. siphoned off the funds
d. disposed off the assets given for the purpose of securing a term loan without the knowledge of the
bank/lender.
Limit for Reporting Purposes :
Rs.25 lakh & above are required to be reported to RBI on quarterly basis.
reported to CIBIL
also sent to SEBI so as to prevent the access to the capital markets by the willful defaulters.
Penal measures
No additional facilities should be granted by any bank / FI
debarred from institutional finance for floating new ventures for a period of 5 years
The legal process should be initiated expeditiously
banks and FIs should adopt a proactive approach for a change of management
Brown Label ATMs
Automated Teller Machines where hardware and the lease of the ATM machine is owned by a
service provider, but cash management and connectivity to banking networks is provided by a
sponsor bank
The `brown label' has come up as an alternative between bank-owned ATMs and 'white label' ATMs
ATM is under the brand and logo of the sponsor bank
results in tremendously cutting costs
White Label ATM
owned and operated by Non Bank entities.
These would be called "White Label ATM Operators" (WLAO) and such ATMs would be called "White
Label ATMs" (WLAs).
They would be permitted to set up WLAs in India, after obtaining authorisation from RBI under the
Payment and Settlement Systems (PSS) Act 2007.
They should have a minimum net worth of Rs 100 crore
From such White Label ATM, customer from any bank will be able to withdraw money, but will need
to pay a fee for the services.
will not display logo of any particular bank
are likely to be located in non traditional places espec Tier III and IV centres
purpose is to expand ATM network
The white label automated teller machines are likely to benefit customers as well as banks. With
the expansion of ATM network, customers will be able to withdraw funds at more locations which
will be convenient and located near to their home or place of work. Banks are likely to reduce pre-
transaction cost for them and will be free from the problems relating to maintaining and running
such a payment channel
Problems:
o Face inconvenience in case of failed transactions as dispute resolution mechanism will
involve three entities — the WLA operator, the sponsor bank of the operator, and the
customer's bank.
o high cost for customer as they are likely to pay for use of such ATMs
PAN (PERMANENT ACCOUNT NUMBER)
Q
QUESTION ANSWER
NO.
1 What is PAN
Permanent Account Number (PAN) is a ten-digit alphanumeric number allotted
by Income Tax Department. Normally it is, issued in the form of a laminated
card, by the IT Department.
Is it necessary to It is mandatory w.e.f.1 January 2005 to quote PAN on challans for any payments
2
obtain PAN due to Income Tax Department.
Sale and purchase of immovable property or motor vehicle;
Payments in cash, of amounts exceeding Rs. 25,000/-to hotels and
restaurants;
For which type of
In connection with travel to any foreign country.
transactions it
3 For obtaining a telephone or cellular telephone connection.
necessary to quote
For making a time deposit exceeding Rs. 50,000/- with a Bank Post
PAN
Office;
depositing cash of Rs. 50,000/- or more in a Bank.