Category: Personal Finance

What is meant by bond yield hardening

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A phone call between two friends leads to a conversation on rising bond yields and what it means to them

Karthik: You know, I have been experiencing frequency illusion.

Akhila: What are you talking about?

Karthik: I learnt what yield means from last week’s Simply Put column in BusinessLine and now I see that word everywhere in all newspaper headlines.

Akhila: That the bond yields are hardening?

Karthik: Yeah. Any idea what yield hardening means?

Akhila: Hardening means rise in value. Yield hardening means bond yields are rising, which indicates that bond prices are falling. In the current context, this is with reference to the 10-year G-sec (or government bond), the yield on which has gone up from 5.9 per cent towards the end of January 2021 to about 6.2 per cent now.

Karthik: Since the yield is calculated by dividing the coupon rate with the current market price, any drop in the bond prices will raise the yields. I understand that. But tell me why are bond prices falling in the market?

Akhila: That is due to the government’s announcement in the budget that it will borrow an additional Rs 80,000 crore in February and March 2021 and a massive Rs 12 lakh crore in FY22.

Karthik: What is the link between bond prices and government borrowing?

Akhila: When the government borrowing increases, the supply of government bonds in the market increase. With concerns of oversupply of government paper in the bond market, there has been pressure on bond prices.

Karthik: Ok..

Akhila: As the yields on G-secs harden, the cost of borrowing not just for the government but also for companies inches up. Companies’ borrowing costs too are linked to G-sec yields.

Karthik: Oh! Can the RBI do something about it?

Akhila: RBI has been buying government bonds via open market operations (OMO) to keep the bond yield under check to control the borrowing cost of the centre. One section of the bond market watchers also argue that the central bank should stay away from any intervention as the rise in bond yields now is being witnessed globally and not exceptional to India.

Karthik: Oh! I get it now. I only hope that my existing fixed-income investments will not be impacted by these rising yields at this point.

Akhila: If you have any investments in the debt funds, they will.

Karthik: Oops. How?

Akhila: Due to the fall in bond prices, the debt funds you invested in may suffer mark-to-market losses on their g-sec or corporate bond holdings.

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Which is a better bet between apartments and villas?

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Looking to buy a home ? There is no debate on the fact that apartments are more affordable even as many buyers vie for villas. However, while the choice on the type of home is probably decided by your budget and your preferences, here are a few factors you should consider when making the choice.

Where apartments save costs

If we look at the options for a home, apartments in large communities are at one end and independent bungalows are at the other end of the spectrum for factors such as privacy, facilities and personalization. Flats in smaller communities and villas in gated communities may fall somewhere in the middle of this.

For a given sq ft of living space, apartments tend to be cheaper in cities, compared to most other choices. The reason for the lower price is simple – land cost. Apartments are usually high-rise developments and tend to maximize floor space index (FSI). Land accounts for the biggest cost in urban areas – 2-10x per sq ft to that of material and labour expenses. And paying for lesser share of land therefore brings down the price of each apartment.

The second reason why apartments beat bunglows and villas in cost is due to lower construction expenses. In a large project, you can get economies of scale – for example when buying material in bulk and engaging labour on contract. Smaller developments or individual home builders may not get this bargaining power, pushing up price.

What you continue to spend over the life of the home also matters.. For example, if you require 24/7 security, backup power and a whole host of services, you may pay more in an individual home versus an apartment. This is because the cost is shared in an apartment or villa community while you have to pay it entirely in an independent home.

Where independent homes score

The cost advantage of apartments may sometimes be offset by higher finance cost in large projects. They may face long delays in completion due to various complexities and lock-up capital. Also, in smaller towns and in peri-urban areas, apartments may be priced comparable to that of individual homes, especially if the project offers a lot of facilities.

A single home can be lighter on the pocket compared to shared communities when you have to pay fixed maintenance costs, whether or not you use the services. Another example is variable costs such as for water. Often resident welfare associations may charge based on sq ft area rather than number of people in an apartment. You could end up paying more than your usage or when you keep it locked.

Other factors

As a home is a big-ticket investment, it helps to consider not just the costs but also the risk and return aspects of the different choices. In real estate, land is the asset that appreciates while building depreciates with time. So, the type of property with the most land assigned to you will be a better investment, all things being equal. This is particularly true when the building becomes old and needs to be reconstructed. The resale value will be entirely based on the land value.

That said, land price appreciation is very location dependent. It is possible that a smaller land share in a good neighborhood which continues to develop offers higher returns than a larger plot of land in a far-off place which does not see growth. This needs to be factored in your decision and you must not be overly swayed by land size alone.

Rental returns – which are quite low for nearly any residential property – may be lower for independent homes versus apartments. One reason is the desire for tenants to have more standard amenities such as security and access to facilities such as swimming pool. Maintenance and upkeep costs may also be higher for the owner, further reducing rental yields.

Lack of liquidity is one key risk factor in property investments and you must factor this in your choice. An apartment has a wider buyer base compared to villas or independent homes. One reason is the lower price, especially in cities where flats may be the only affordable option. But many home buyers prefer a flat for other reasons such as maintenance support, water and common facilities. Also, apartments are more standard in their layout and features compared to a custom-built home. The personalization done may limit buyer interest compared to the more generic look of an apartment.

Monthly bills

Fixed maintenance costs in an apartment may be high in large complexes compared to individual homes

Flats are up

Wider buyer base

Rental potential

More affordable

The author is an independent financial consultant

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Best Fixed Deposits For Senior Citizens With Good Returns Up To 7.75%

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Top Small Finance Bank FD Rates For Senior Citizens

The FD rates mentioned below are of top small finance banks and are valid to deposits below Rs. 2 crore for senior citizens.

Banks Tenure ROI in %
Suryoday Small Finance Bank 5 years 7.75%
Utkarsh Small Finance Bank 700 days 7.50%
Equitas Small Finance Bank 888 days 7.30%
Fincare Small Finance Bank 36 months 1 day to 59 months 7.00%
Jana Small Finance Bank Above 2 to 3 years 7.00%
Ujjivan Small Finance Bank 1 year – 2 years 7.00%

Top Private & Public Sector Bank FD Rates For Senior Citizens

Top Private & Public Sector Bank FD Rates For Senior Citizens

The fixed deposit rates for senior citizens listed below are related to deposits of less than Rs. 2 crore.

Banks 1-year rate 3-year rate 5-year rate
RBL Bank 7.00% 6.75% 6.25%
DCB Bank 6.55% 7.25% 7.25%
YES Bank 6.75% 7.50% 7.50%
Bandhan Bank 6.50% 6.40% 6.25%
Axis Bank 5.65% 5.90% 6.00%
IDFC First Bank 5.75% 5.75% 5.75%
IndusInd Bank 7.00% 7.00% 7.00%
Federal Bank 5.60% 5.85% 6.00%
Canara Bank 5.70% 6.00% 6.00%
HDFC Bank 5.40% 5.65% 5.80%
ICICI Bank 5.40% 5.65% 5.85%
Bank of Baroda 5.40% 5.60% 5.75%
PNB 5.70% 5.80% 5.80%
State Bank of India 5.50% 5.80% 6.20%

Key takeaways of senior citizen FD schemes

Key takeaways of senior citizen FD schemes

The following facts illustrate the characteristics of fixed deposit schemes for senior citizens proposed by different banks:

  • Usually, the tenure of senior citizen FD schemes ranges from 7 days to 10 years
  • Additional FD rates typically vary from 0.25 per cent to 0.65 per cent provided to senior citizens as opposed to non-senior citizens.
  • Most of the banks provide interest on a monthly, annual or semi-annual basis to senior citizens.
  • Bulk deposits for senior citizens start at Rs. 2 crore and go up.
  • Senior citizens can claim 80C deductions for up to Rs. 1.5 lakh if they invest for a term of 5 years in a fixed deposit.

Documents required

Documents required

To effectively open a fixed deposit account at any bank or non-banking financial company, the following list of documents must be kept handy by senior citizens:

  • Residence proof: Utility bills of the last 3 months, Aadhaar Card, PAN Card, Voter ID Card
  • Identity proof: Passport, Voter ID Card, Aadhaar Card
  • PAN Card or Form 60
  • Form 15H
  • Age proof: Age or date of birth issued by any Government Institution/Agency/Local Body

Eligibility criteria

Eligibility criteria

Most of the banks allow senior citizens who are 60 years of age or higher to open a fixed deposit account. Super senior citizens are also considered by some of the banks. Those are the ones who have passed the 80-year age barrier. They are provided above the rates promised to senior citizens with additional fixed deposit interest rates.

TDS applicable on senior citizen FD schemes

Banks and NBFCs subtract tax from earned interest before crediting it to the depositor’s account in the case of fixed deposits. TDS is levied as the interest accrues, i.e. monthly, quarterly, half-yearly or annually, in the case of accumulated interest payments. If received interest crosses Rs. 50,000 for senior citizens, tax is withheld at a rate of 10%, similar to Rs. 40,000 for ordinary citizens.



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5 Public & Private Sector Banks Providing Up To 7% Returns On 1 Year FD

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How can I enhance my FD returns?

For Indian customers, fixed deposits are one of the most prominent deposit schemes. High interest rates with tenure ranging from 7 days to 10 years make it the perfect option for both short- and long-term investors. The prominence of FDs has risen slowly over time as more people understand the opportunity for better returns from this financial asset. If you glance at, as opposed to stock markets or mutual funds, the purpose of FDs is to get better returns in a reasonably risk-averse manner. Laddering deposits are a form of stretching the capital through several fixed deposit accounts in order to receive higher returns while earning liquidity at periodic intervals. Laddering deposits simply divide the deposits into separate ‘ladders’ as the name implies. A multitude of advantages not restricted to simple liquidity are offered by laddering deposits. At its essence, this technique will allow you to take the helm of your capital. Laddering your deposits will enable you to prevent early withdrawal misfortunes. In particular, when you decide for premature withdrawal, banks may owe a certain additional charge. You should also search for multiple opportunities to invest in the market by laddering deposits. You may invest in any other financial instrument that promises better returns. Laddering does not benefit much to get better returns in a click, but it will definitely make sure the returns are stable. Laddering is suitable for elderly people who have a lump sum of money to invest, so that they can expect regular returns on a monthly, quarterly, or other periodic basis. In the long term, though, laddering is more likely to have higher returns than in the short-term.

Tips to pick the best fixed deposit scheme

Tips to pick the best fixed deposit scheme

To get the highest returns on your investment, you need to determine the best Fixed Deposit (FD) scheme. In order to select the best FD scheme, before opting for a term deposit, you need to weigh certain variables. Factors such as interest rate charged, the legitimacy of the bank or financial institution providing the FD, overall return and so on are prudent to remember. Banks and non-banking financial companies (NBFCs) both provide fixed deposit schemes to the eligible investors. In contrast to banks, NBFCs or corporate FDs typically offer a higher rate of interest on fixed deposit. Among the most searched after saving accounts for investors is bank fixed deposits as they fetch higher returns compared to savings accounts. In contrast with corporate fixed deposits, bank fixed deposits usually pay lower interest rates but fetch guaranteed returns with insurance cover benefit. The considerations to remember while applying for an FD are as follows:

  • The rate of interest charged is one of the most critical considerations to remember when selecting an FD scheme. All investors should compare FD interest rates and pick the best alternative.
  • Don’t just pick the FD that bears a higher interest rate. There are other aspects that need to be taken into consideration as well, such as the legitimacy of the bank or company providing the term deposit. Ideally, select schemes with a ‘A’ ranking and accept scores from organisations such as ICRA and CRISIL if you consider opting for company deposits.
  • The period over which the deposit is kept is another factor deciding your investment’s return. If you want to reinvest the interest you receive, you would get a significantly higher overall return against your deposit.
  • Check if the FD you’re considering offers a number of interest payout alternatives. Have a peek at the interest payout frequency which typically ranges from monthly, quarterly, annually or half-yearly basis.

An important note for FD investors

An important note for FD investors

At its most recent monthly monetary meeting, held from 3 to 5 February 2021, the Reserve Bank of India (RBI) agreed to hold the repo rate untouched once again. The reserve bank has maintained the main rates steady for the fourth time in a row. The repo rate and reverse repo rate, despite the declaration, stand at 4% and 3.35%, respectively. The RBI was allowed to hold the repo rate unchanged in order to keep a cap on government bond yields, which are projected to increase due to stronger borrowings anticipated by the government in FY 2021-22. The probability of a significant decrease in borrowers’ loan equated monthly instalments (EMIs) is weaker unless the central bank does not adjust the repo rate and reverse repo rate. No adjustment in policy rates, on the other extreme, indicates best wishes for fixed deposit (FD) holders as banks are unlikely to further slash interest rates on FDs.

1 Year FD Rates

1 Year FD Rates

Private banks are now promising one-year FDs at a rate of 6.5 per cent. For one-year FDs, IndusInd Bank and RBL Bank, for example, provide 6.5 per cent interest rates. There are higher interest rates than those proposed by public sector banks. In contrast to large private banks, small finance banks pay higher interest rates. On one-year FDs, AU Small Finance Bank and Ujjivan Small Finance Bank pay 5.50 and 6.50 per cent interest, respectively. To know more about small finance bank FD rates, click here. On one-year FDs, major private banks such as ICICI Bank and HDFC Bank bid 4.90 per cent interest. Axis Bank is reportedly offering a 5.15 per cent interest rate. On a one-year FD, Kotak Mahindra Bank pays 4.50 per cent, the lowest rate across private banks. On one-year FDs, public sector banks like Union Bank, Punjab & Sind Bank and Bank of India pay 5.25 per cent interest. For their one-year FDs, State Bank of India (SBI) and Bank of Baroda (BOB) provide 5 per cent and 4.90 per cent interest, respectively.

Private Sector Banks 1 Year FD Rates In % For Non-Senior Citizens 1 Year FD Rates In % For Senior Citizens
IndusInd Bank 6.5 7
RBL Bank 6.5 7
Yes Bank 6.25 6.75
DCB Bank 6.05 6.55
Bandhan Bank 5.75 6.5
Public Sector Banks 1 Year FD Rates In % For Non-Senior Citizens 1 Year FD Rates In % For Senior Citizens
Bank of India 5.25 5.75
Punjab & Sind Bank 5.25 5.75
Union Bank 5.25 5.75
Canara Bank 5.2 5.7
Indian Overseas Bank 5.15 5.65



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List Of Banks Providing The Cheapest Interest Rates On Gold Loans Starting From 7%

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Gold loan eligibility

You must make sure to follow the eligibility requirements stated by the lender if you want to take advantage of a loan against your gold jewellery or ornaments. Bear in mind that eligibility conditions differ from one lender to the next. Therefore, before applying for a gold loan, it is prudent to review the eligibility conditions stated on the lender’s official site. The below are the standard eligibility requirements:

  • The minimum age limit of the applicant must be 18 years or above
  • To pledge it as security, he or she must have gold ornaments or articles
  • The maximum carats of gold that can be pledged must be at least 18 carats.
  • The applicant must have the acceptable credit score for taking a gold loan.

Documents required for a gold loan

Documents required for a gold loan

The following documents must usually be provided by the claimant in order to take advantage of the gold loan:

  • Duly filled loan application form
  • Two recent passport size photographs
  • Form 60 or PAN card
  • Identity proof: Driving license, Aadhaar Card, ration card, PAN Card
  • Address proof: Aadhaar card, voter id card, electricity bill, telephone bill, etc.
  • Signature Proof

Key benefits of taking a gold loan

Key benefits of taking a gold loan

A gold loan can be used to cover a range of emergency cash needs, namely hospital expenses, schooling of your child, family holidays and so on. If you’re in a bind and need money right then, you should use the wonderful gold in your vault to cover your immediate financial requirements. Gold loans are available from a number of banks and non-banking financial companies (NBFCs). This loan is among the cheapest and most hassle-free options to get immediate cash. To know more about the benefits read out the below-listed facts:

  • Because gold loans are supported by physical gold, lenders typically process the loan faster, so borrowing against gold is secure for banks and if you fail, they have the ability to sell the gold.
  • The gold pledged to the bank or the financial institution serves as the security or collateral against which the loan amount is credited to the applicant. Gold loans have a spectacular aspect in that the applicant can pay only the interest portion of the loan and the principal balance can be repaid at the time of the loan’s closure.
  • Banks offer lower interest rates on secured loans than on unsecured loans like personal loans because they are secured.
  • Most of the NBFCs and banks do not impose processing costs because these loans are issued immediately in favour of gold retained by the lender as security.
  • Most of the banks impose a prepayment penalty of 1 per cent only.
  • Because the loan is guaranteed against the gold to be held with the bank, most lenders do not need income proof.
  • In comparison to other loans, where the loan amount is calculated based on the borrower’s potential to reimburse and credit score, the circumstance with gold loans is specific. As the gold is used as security, the lenders are not bothered with the key factor and therefore do not verify the borrower’s creditworthiness.

Things to consider while applying for a gold loan

Things to consider while applying for a gold loan

A few factors that you must evaluate when applying for a gold loan are mentioned below:

  • The amount of the loan you get will be dependent on the worth of the gold you vow when you take advantage of a gold loan. A minimum and maximum loan amount could also have been specified by lenders. If you need a specific loan amount, please ensure you have the appropriate gold and that it falls under the lender’s guidelines.
  • The interest rate charged on a gold loan is lower than opposed to an unsecured loan, as the investor will have to provide security. This being said, the interest rate levied will differ from lender to lender, and comparing the interest rates charged by various lenders will be the best approach.
  • Lenders can impose a variety of other fees in comparison to the interest rate, such as processing fees, documentation fees, appraiser fees, default payment fees, overdue loan fees, etc. These costs, together, can increase the overall cost of the loan. Thus, make sure that before applying for a gold loan, you take into consideration the charges charged by the lender.
  • The repayment period on gold loans will be anywhere between three to 36 months. You should also be careful to take the repayment potential into account and choose a gold loan with an acceptable tenure.
  • Before applying for a loan, it is generally advised that you compare the attributes, advantages, and terms and conditions of the gold loans provided by various lenders.
  • To maximise the likelihood of your loan application being accepted, before applying for the loan, you must review the eligibility conditions of the lender.

Gold Loan Interest Rates

Gold Loan Interest Rates

Below are the cheapest interest rates on Rs 5 lakh gold loans availed for a three-year term presently promised by some of the leading banks. Please bear in mind that your interest rate can vary depending on the amount of your loan, the period of your loan, or any other terms and conditions imposed by the bank or NBFC.

Sr No. Banks ROI in % per annum
1 Punjab & Sind Bank 7
2 Bank of India 7.35
3 State Bank of India 7.5
4 Canara Bank 7.65
5 Union Bank 8.2
6 Karnataka Bank 8.37
7 Indian Bank 8.5
8 UCO Bank 8.5
9 Federal Bank 8.5
10 Punjab National Bank 8.75
11 J&K Bank 8.85
12 Central Bank 9.05
13 Indian Overseas Bank 9.25
14 HDFC Bank 9.5
15 Bank of Baroda 9.6
16 Dhanlaxmi Bank 9.7
17 Karur Vysya Bank 10.1
18 ICICI Bank 11
19 South Indian Bank 11.95
20 Axis Bank 12.5

Note

Note

For loans approved by banks against the promise of gold ornaments and jewellery for non-agricultural reasons -, the allowable loan-to-value (LTV) ratio was raised to 90%. Only loans approved before March 31, 2021, will be eligible for the change. The former LTV cap of 75 per cent will apply to gold loans sanctioned on or after April 1, 2021. Banks will now lend up to 90 per cent of the amount of the gold ornaments that individuals have promised to them, compared to 75 per cent previously.



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South Indian Bank gets board nod to raise Rs 204 cr

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The lender said that up to 28,30,18,867 equity shares of face value of Rs 1 each at an issue price of Rs 8.48 each will be issued to the insurance firms, subject to the approval of the shareholders and regulator.

In a regulatory filing, South Indian Bank (SIB) said on Friday that it has got its board’s approval to raise Rs 240 crore by issuing equity shares on a preferential basis from HDFC Life Insurance Company, Kotak Mahindra Life Insurance Company, SBI Life Insurance Company and ICICI Lombard General Insurance Company.

The lender said that up to 28,30,18,867 equity shares of face value of Rs 1 each at an issue price of Rs 8.48 each will be issued to the insurance firms, subject to the approval of the shareholders and regulator.

Post-allotment of the securities HDFC Life, Kotak Mahindra Life and SBI Life will hold 4.23 % shares of the bank each while ICICI Lombard General Insurance will hold 0.85 % shares.

The board has also approved the convening of an extraordinary general meeting of the shareholders of the company to be held on Tuesday (March 23,2021) for seeking their approval for the proposed preferential allotment.

SIB had obtained approval of shareholders in the last AGM for raising funds in Indian or foreign currency by way of issuance of debt securities up to Rs 5OO crore. The lender has also obtained approval of shareholders for increasing the authorised capital of the bank to Rs 350 crore.

The bank had reported a net loss of Rs 91.62 crore in the third quarter of the fiscal on the account of higher credit cost.

The lender had said earlier that it will focus on 6Cs , which includes, raising capital , CASA (current and savings account), cost-to-income, competency building, customer focus, and compliance in the medium term, to achieve profitability through quality-credit growth.

Under the new plan ‘Vision 2024’, the bank aims to reach a loan book of Rs 1 trillion, CASA mix of 35%, PCR (provision coverage ratio) of over 65% and net interest margin (NIM) of 3.5% by 2024. The plan includes vertical structure for assets business and data analytics team to play a critical role in business and collections.

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List Of Banks And HFCs Providing The Cheapest Interest Rates On Home Loans

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Banks giving the lowest interest rates on home loans

For a loan amount of Rs 75 lakhs with a term of 20 years, Kotak Mahindra Bank appears to dominate the list of cheapest home loan offerings with 6.75 per cent. The state-owned gargantuan State Bank of India provides the eligible investors with the lowest interest rate of 6.8%. A specific rate for home loans of Rs 75 lakh is also provided by some other public sector bank, Punjab National Bank (PNB) and the country’s largest mortgage lender, HDFC.

Banks ROI in % p.a.
Kotak Mahindra Bank 6.75
Punjab National Bank 6.8
SBI >=6.80
HDFC Bank 6.8
Bank of India 6.85
Central Bank of India 6.85
Bank of Baroda 6.85
Canara Bank 6.9
Punjab & Sind Bank 6.9
Union Bank of India 6.9
Axis Bank 6.9
UCO Bank 6.9
IDBI Bank 6.9
ICICI Bank 6.9

Housing Finance Companies providing the cheapest rates on home loans

Housing Finance Companies providing the cheapest rates on home loans

Housing finance companies (HFCs) have been slashing their rates as well. HFCs are non-banking firms that provide eligible investors with loans. For investors, they are also a favoured option because paperwork is hassle-free, allows homebuyers better loan-to-value, and often provides loans to people with poor credit ratings. Take a brief glance at the interest rates on home loans from HFCs below. The below-listed rates as of Feb 19-2021, may vary based on the loan amount, type of borrower, credit score, income background of the borrower, the loan-to-value ratio, and any other conditions specified by the lender.

HFCs ROI in % per annum according to the loan amount
Less than Rs 30 lakh Rs 30 lakh up to Rs 75 lakh > Rs 75 lakh
Dewan Housing >=8.75 >=8.75 >=8.75
Tata Capital >=6.9 >=6.9 >=6.9
Piramal Cap & Housing Fin NA NA NA
PNB Housing 7.35- 9.45 7.35- 9.60 7.70- 9.6
Central Bank Housing 9.80-11.0 9.80-11.0 9.80-11.0
HDFC Ltd 6.80-7.65 6.80-7.90 6.80-8.0
Indiabulls Housing Fin >=8.65 >=8.65 >=8.65
Aditya Birla Housing Fin 9-12.5 9-12.5 9-12.5
Bajaj Finserv >=6.9 >=6.9 >=6.9
GIC Housing Finance Ltd 9.1-12.5 9.1-12.5 9.1-12.5
Reliance Home Finance 9.75-13 9.75-13 9.75-13
Sundaram Home Finance Ltd >=7.85 >=7.85 >=7.85
LIC Housing Finance Ltd 6.9-7.85 6.9-8.05 6.9-8.1

Tips to get a home loan at the best possible rate

Tips to get a home loan at the best possible rate

At the lowest standard, there is no fixed methodology for using housing loans. There are, though, a few exercises that can help you make use of the lowest possible home loan offer are as follows:

  • Banks use your credit ratings initially to set home loan interest rates over and above the external benchmark rate, as per RBI guidelines. Because a high credit score represents prudent credit activity, applicants with a lower credit score can pay higher interest on their home loans, and conversely. And, borrowers can receive lower rates with a higher credit score.
  • If you jointly apply for a home loan with your spouse and make her the principal claimant for your home loan, you can get the cheapest housing loan rate. Many banks provide women with interest rate concession home loans at an interest rate that is less than 0.5 per cent of the standard interest rate on home loans. A joint home loan would also improve the eligibility for your home loan, as well as tax deductions on home loans.
  • If your existing bank or financial company is offering a higher rate of interest, you also may ask for a home loan balance transfer. You can migrate to a different bank that provides a better interest rate. However, examine the entire cost of the loan transfer before considering the step.
  • Another aspect that determines your home loan rate is the loan amount. The related collateral risk also improves for lenders, as the home loan value increases. Lenders impose a higher interest rate to cover the raised risks. It is thus suggested to the investors to contribute a higher down payment.

Aspects that influence home loan rates

Aspects that influence home loan rates

Considerations accountable for the rise or fall in the interest rate on housing loans are:

  • Lenders are now using the credit history initially to adjust home loan interest rates over and above the external benchmark limit. A higher rate of interest on home loans causes a lower credit score and conversely.
  • The loan amount you repay will also impact the rate at which the housing loan is issued. As opposed to home loans of a higher amount, home loans up to Rs. 30 lakh typically have a cheaper interest rate.
  • For salaried employees usually, the home loan interest rate is less than the interest rate provided to self-employed individuals.
  • The interest rate on home loans is of two types i.e. fixed and floating. For your home loan, the type of interest rate you select will evaluate the rate at which you will reimburse your lender. EMIs stay the same for the total loan term in the context of fixed-rate home loans. On the other extreme, floating rates vary due to the adjustment in the lending rate, like the Repo Linked Lending Rate (RLLR).
  • The rate of interest on home loans also varies according to the type of home loan. Standard home loans have standard rates, whereas their alternatives typically have a higher interest rate, such as home loans for NRIs.
  • According to the RBI, interest rates on housing loans are related to external benchmark rates. Under the new structure, the home loan interest rate of all banks in India will be influenced by any adjustment in the external benchmark rate.



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Aditya Birla Health Insurance to Offer up to 100% Return on Premium

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Insurance

oi-Sneha Kulkarni

|

Aditya Birla Health Insurance Company has launched an industry-first programme promising up to 100% premium returns for health insurance. The offer is a new version of its Activ Health product, which offers comprehensive health protection with extensive wellness benefits.

Through its revamped version of Activ Health policy, the plan provides up to 100 percent premium refunds, discounts and up to 100 percent reloading of Sum Insured.

Aditya Birla Health Insurance to Offer up to 100% Return on Premium

Alternatively, it also provides Rs 3-6 crore coverage for major diseases and cashless hospitalization for serious diseases for overseas care, the company said.

Key Highlights of the plan

  • Stay healthy, and earn up to 100% of your premium.
  • Earn 50 % of No Claim Bonus for each year free of charge up to a limit of 100% of the amount insured.
  • Access to Expert Health Coach for guidance on medical, nutritional, fitness, mental counselling session, homeopathy teleconsultation.
  • Modern Treatment Expenses like robotic surgeries, oral chemotherapy, etc.
  • Covers pre & post-hospitalization expenses for mental illnesses.

Things covered under the plan

  • In-Patient Hospitalization and Home treatment expenses
  • Pre-hospitalization medical expenses
  • Organ donor expenses
  • Day care treatment

Through working out with the fitness videos available through the Activ Health application, customers can also receive their ‘HealthReturns’. Here, those participating in fitness programmes earn the returns that can be redeemed for health and future premiums.

Customers ought to have an active day for this. This implies that customers must either burn 300 calories in one session, take 10,000 steps or visit an exercise at the gym. There is also the option of undergoing fitness assessments every six months for customers not able to complete these.

GoodReturns.in



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List Of Private Sector Banks Providing Up To 6.75% Interest Rate On 2-3 Year FDs

Personal Finance

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Key benefits of investing in fixed deposits

The following aspects illustrate the benefits of investing in a fixed deposit scheme that one can appreciate:

  • Return on a fixed deposit can be measured as the rate of interest is fixed at the time of investing. Since one can quickly measure the maturity amount, this results in improved personal finance of an investor.
  • It is possible to open a fixed deposit for a short, medium and long term duration. Banks, including NBFCs, offer flexible maturity options spanning from 7 days to 10 years.
  • DICGC supports the depositor with a cover of Rs. 5 lakh for those who have FD in a recognized bank in India, in the event of bankruptcy.
  • Depositors can cite the contributions made in a financial year as exemptions when filing the Income Tax Return of up to Rs. 1.5 lakh in a fiscal year when investing in a 5-year tax saving FD.
  • Favourable additional FD interest rates above the regular fixed deposit interest rates are provided to senior citizens over 60 years of age. This can vary from 0.25 to about 0.65 percent in general.

Eligibility criteria

Eligibility criteria

It is reasonably necessary to know who can open a fixed deposit account in order to amass the benefits mentioned above. The category of those (may vary from bank to bank) that are liable for a fixed deposit investment is given below.

  • Indian residents with a minimum age limit of 18 years
  • Hindu Undivided Family (HUF)
  • Corporations or sole proprietorships, partnership companies
  • Trust Accounts

Documents required

Across all banks and/or non-banking financial companies, the documents needed while applying for FD are listed below:

  • Identity proof: Passport, Aadhaar Card, PAN card, Voter ID Card, Driving licence, Government ID card, Ration Card, Senior citizen ID card, passport size photographs
  • Address proof: Passport, telephone bill, electricity bill, bank statement with cheque
  • Income proof: Salary slip of the last 3 months, bank account statement for the last 3 months

Tax deduction on FD

Tax deduction on FD

Fixed deposits also enable depositors to claim deductions under section 80C of the Income Tax Act, 1961. Resident citizens or Hindu Undivided Families (HUFs) who have deposited in a tax-saving FD are allowed to claim a deduction of up to Rs. 1.5 lakh in a financial year. Tax-saving fixed deposit schemes, though allow tax advantages, this implies that while the initial amount of the deposit is qualified as a deduction of u/s 80C, the interest income is not free from taxation. At your tax slab rate, FD Interest is taxable including relevant surcharge/cess. If the interest amount for the entire financial year surpasses Rs 10,000 for AY 2019-20, the TDS rate on fixed deposits (FDs) is 10 per cent. This TDS deduction cap on FD is raised to Rs. 40,000 annually in the budget speech 2019, which is effective in AY 2020-21. The TDS limit on fixed deposit interest is 20 per cent under current income tax laws if you do not support the bank with your PAN Card.

How to receive higher returns from fixed deposits?

How to receive higher returns from fixed deposits?

In order to gain better returns on their investments, after risk estimation, investors should consider parking their funds in the below-listed private sector bank FDs. Instead of investing all in a single FD and attempting to reinvest it after maturity, if possible, to create an accumulation pattern, they can opt for the laddering strategy to optimise FD returns. Investors can reap from any higher interest rate investments in the future by this strategy. It is possible to keep their savings even more liquid as it will eliminate the risk of needing to pre-close an FD before maturity to satisfy any unforeseen necessity after sacrificing interest amount. Interesting to note here is that FD laddering doesn’t mean you are putting your entire amount in the same bank in multiple FDs. You must have multiple tenure FDs in various banks to avoid risk. Investment allocation across various FDs across different maturities reduces the risk of interest rates and deposit tenure. In the recent past, though, fixed deposits have weakened their appeal after the Reserve Bank of India cut repo rates by 115 basis points to boost the pandemic-hit country. Although the market is under some higher inflation strain and the financial sector has begun to rebound, few analysts say that the cheapest interest rate outcome will not be continued and FD rates may increase in the foreseeable term.

2-3 Year FD Rates

2-3 Year FD Rates

Banks 2-3 Year FD Rates In % For Non-Senior Citizens 2-3 Year FD Rates In % For Senior Citizens
IDFC First Bank 4.5 5
Kotak Bank 5 5.15
HDFC Bank 5.15 5.65
ICICI Bank 5.15 5.65
J&K Bank 5.2 5.7
Federal Bank 5.35 5.85
Axis Bank 5.4 5.9
Dhanlaxmi Bank 5.4 5.9
South Indian Bank 5.4 5.9
Karur Vysya Bank 5.5 6
Karnataka Bank 5.55 5.95
Tamilnad Mercantile Bank 5.65 6.15
Bandhan Bank 5.75 6.5
City Union Bank 5.75 6.25
TNSC Bank 5.85 6.35
IndusInd Bank 6.5 7
RBL Bank 6.5 7
Yes Bank 6.5 7
DCB Bank 6.75 7.25



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5 Best Tax Saving Schemes With Guaranteed Returns Up To 7.6%

Personal Finance

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5-year Tax Saving FD

For risk-averse investors, bank fixed deposits are the most common investment alternative. Tax saving FDs of banks comes with a lock-in period of 5 years. Currently, on 5-year tax-saving FDs, SBI is giving an interest rate of 5.4 per cent to non-senior citizens and 6.2 per cent to senior citizens. According to Section 80TTB, senior citizens can claim a deduction of Rs 50,000 on the interest received from deposits. On tax-saving FDs investment and maturity amount are tax-free, but interest is taxable. That being said, only if the fixed deposit returns surpass Rs 40,000 (Rs 50,000 for senior citizens) in a year, TDS is deducted by the bank. TDS on your fixed deposit income withheld by the bank is 10 per cent if you support the bank with your PAN specifics. To know more about tax saving FDs, click here.

National Savings Certificate (NSC)

National Savings Certificate (NSC)

In order to diversify their fixed-income holdings, NSCs are very common among risk-averse investors. For a term of five years, it provides guaranteed interest. NSC is currently offering 6.8 per cent interest which is paid at maturity but compounded annually. However, interest earned from 5-year NSC is taxable at the time of maturity. It is worthwhile to know that, under Section 80C, the interest amount that is reinvested counts for a tax deduction, making it tax-free. One can make a deposit in this small saving scheme by a minimum of Rs. 1000/- and in multiples of Rs. 100/- with no upper limit.

Senior Citizen Savings Scheme (SCSS)

Senior Citizen Savings Scheme (SCSS)

SCSS is another post office small savings scheme for individuals over 60 years of age. Currently, SCSS is providing a guaranteed return of 7.4% (payable quarterly) which is much higher than senior citizen special FD schemes of banks. This scheme comes with a tenure of five years and, within one year of maturity the SCSS account can be further extended to a block of 3 years. One can deposit in the account in multiples of Rs 1000/- up to a limit of Rs 15 lakhs. Interest received on SCSS is taxable if in a financial year it reaches Rs 50,000 and TDS is calculated accordingly as well. In the event of any surplus deposit made to the SCSS account, the excess balance will be automatically reimbursed to the account holder and only the interest rate of the PO Savings Account will be available from the date of the surplus deposit to the refund date. Under section 80C of the Income Tax Act, 1961 deposits made towards SCSS qualify for tax deductions.

Sukanya Samriddhi Yojana (SSY)

Sukanya Samriddhi Yojana (SSY)

In the name of a girl child, a parent or guardian can open the SSY account before she reaches 10 years of age. Under this government-backed scheme up to 15 years from the date of account opening, one can make deposits. After 21 years or at the time of the girl’s marriage, the SSY account matures after she turns 18. If the girl hits the age of 18 or after completing Class 10, an individual is allowed to withdraw up to 50 per cent of the deposit. For a limit of two daughters, the account can be opened with a total contribution of up to Rs 1.5 lakh per year. With effect from 01-04-2020 SSY is providing an interest rate of 7.6% per annum which is calculated on a yearly basis. Investments under SSY, as PPF, come under EEE status, which means that at the time of deposit, accrual of interest and withdrawal, an investor receives a tax deduction.

Public Provident Fund (PPF)

Public Provident Fund (PPF)

PPF is among the best investments in the fixed income space as it is backed by the government and provides no market-linked returns. That being said, the downside of this scheme is that it comes with a long maturity period of 15 years. If you do not need the interest income at the time of maturity, the maturity can be extended further by a block of 5 years. In some conditions, the PPF allows early withdrawals within five years of account opening. PPF currently proposes an interest rate of 7.1% p.a, compounded annually. Under PPF deposits can be made in lump-sum or in ​installments with a minimum contribution of Rs 500 up to a limit of Rs 1.5 lakh per annum. An account holder can make one withdrawal after five years, except the year of account opening, within a financial year. At the end of the 4th preceding year or at the end of the preceding year, withdrawal can be made up to 50% of the account balance whichever is lower. PPF comes under the tax status of EEE, which implies that at the time of deposit, accrual of interest and withdrawal, an account holder can claim a tax deduction.



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