On Thursday, the Pension Fund Regulatory and Development Authority (PFRDA) confirmed that NRI subscribers are authorized to use the direct remittance service, or D-Remit, to make automated contributions from their bank accounts towards NPS. PFRDA has now proposed to enhance the NPS (National Pension System) contribution alternative by D-Remit to NRI-NPS participants, who can make deposits from their Non-Resident Ordinary (NRO) or Non-Resident External Account (NRE) accounts towards NPS. As per PFRDA the proceeds of NPS will also be allocated to the NRO/NRE account of NRI subscribers at the end of the tenure or at the time of withdrawal and resettlement will be conducted as per the relevant FEMA regulations. D-Remit provides a simple way to make voluntary deposits towards NPS and also enhances the formation of long-term pension capital by providing NAV (net asset value) on the same day.
Via this, regular NPS contributions from the subscribers’ bank account can be automated for any given amount and for any specified date. Under D-Remit, for the same-day investment, deposits provided at the trustee bank until 9.30 a.m. on every bank operating day are regarded. The D-Remit function for automated contributions was rolled out in October 2020 by PFRDA. To date, NPS subscribers have developed 1.23 lakh D-Remit IDs to take advantage of D Remit’s benefit and contribution on the same day. PFRDA stated that in the past four months, more than Rs 130 crore of NPS voluntary contributions have been accumulated into NPS through D-Remit facility.
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I think at the end of the financial year 2021 (FY21), our credit growth should be around 7%.
The country’s largest lender, State Bank of India (SBI), expects a double-digit credit growth by the second quarter of financial year 2022 (Q2FY22). In an interaction with media after earnings, SBI’s chairman Dinesh Kumar Khara said the bank is expecting around 7% credit growth at the end of the current financial year (FY21). Khara also said that lender will not require any more provision for transferring of the asset to an asset reconstruction company (ARC) proposed in the Union budget. Excerpts:
Given there is a proposal to transfer the bad loans to a national asset reconstruction company (ARC), will any additional provisioning be required? We are already having provisioning coverage ratio (PCR) of more than 90%. As and when it materialises, I don’t expect we will require any additional provisioning. In any case the modalities of the valuation at which the assets will be transferred is yet to be firmed up, and that is being discussed and deliberated. Once we have a clarity on that, we will have even a firmer picture. But I would say, considering the fact that even in our corporate advance book also, our PCR is as high as 87-88%, so I do not think we will require any more provision before we transfer any of the asset to an ARC and asset management company (AMC).
Can you break down your proforma slippages? Will you be able to contain your total slippages at `60,000 crore as per your earlier guidance? In aggregate we have received Rs 18,000 crore restructuring applications. Around Rs 3,900-crore restructuring requests have come from the retail personal segment, around Rs 2,500 crore from small and medium enterprises (SME) and around Rs 11,000 crore from the corporate segment. Proforma slippages at nine months ending December 2020 remained at Rs 16,461 crore and the total restructuring requests till December 2020 are at Rs 18,125 crore. So, put together total slippages and restructuring up to Q3FY20 remained at Rs 41,216 crore. For the whole financial year, total slippages and restructuring at the end of financial year (FY21) should remain within Rs 60,000 crore.
What is your credit growth target at the end of financial year 2021 (FY21)? I think at the end of the financial year 2021 (FY21), our credit growth should be around 7%.
Last quarter you said that SBI’s credit growth would be around 8-9%, have you revised that due to subdued corporate credit growth? Corporate loans are subdued even now. We would see growth coming from the public sector entities’ capital expenditure. That is why I have indicated credit growth more in the range of 7%, considering the fact that only two months are left for the financial year. So, earlier we had indicated 8%, which is now deferred to 7% credit growth.
By when do you expect double digit credit growth for SBI? I would expect from the second quarter of financial year 2020 (Q2FY22) onwards, we should be able to see double-digit credit growth.
You said that SBI expects pick-up in the corporate loan book. What gives you confidence for that? The reason for the confidence is that if at all there is going to be infrastructure spend, the way it has been indicated in the Budget, there is going to be a definite improvement in the economic activity in the core sector which is iron and steel, cement, and construction sector. So, actually that will lead to the demand generation.
Will you revise your credit cost guidance of 2%? Where do you stand now? As the situation stands, we should be able to keep the credit cost much lower than 2%. Even with the proforma slippages, our credit cost at the end of Q3FY20 stands at 1.1%. So, I think we should be much better than our own guidance of 2% credit cost.
After government has announced increasing the foreign direct investment (FDI) limit in the insurance sector to 74% from 49%, will your foreign partner in the insurance subsidiaries look to increase stake? The provisions announced in the Budget says that foreign investment is permitted, but the ownership still continues with the Indian owners. At least they will have 51% ownership. As of now we do not have any such plan. May be going forward, we will evaluate at the material point of time. To my mind, as of now there is no change in the policy-thinking of the insurance subsidiaries.
Union Budget has proposed a new Development Finance Institution (DFI). Given that SBI is a large player in the project finance space, do you see any need for re-strategising as the whole idea is to take the burden of the infrastructure financing from the banking system? It is a very welcome step announced by the Finance Minister (FM) for setting up of DFI to support infrastructure needs of the country. I would say there is an ample room for other institutions to play in this space. This space will continue to be open for us. As the market evolves, there would be situation where such loans would be subject to secondary market also. So, I think we will have enough space to grow in this particular segment. And, we perceive it as an opportunity for us to have excellent players in the space and to cater to the needs, because infrastructure needs of the economy are going to grow like anything. So, for that many more players are required.
A Post Office Savings Account is identical to a standard savings account in several respects. It is known to be a highly reliable instrument for the deposit of funds and provides the possibility, if necessary, of complete or partial liquidation of deposits. In particular, these accounts offer a fixed return on deposit and are suitable for retirees and individuals seeking to gain a guaranteed regular income.
Eligibility required to open a post office savings account
To open a savings account in post office you must meet with the below-listed eligibility criteria:
Minor with a minimum age limit of 10 years old
Up to three adults in case of joint account
A guardian on behalf of minor or person with unsound mind
Post office savings account interest rate
The interest rate of the post office savings account is calculated by the central government from time to time. Interest is measured and paid annually on monthly deposits. As announced, Post Office Savings Accounts receive a fixed interest rate over the year, subject to adjustment from time to time. The interest rate is currently kept at 4%.
Key benefits of post office savings account
Some of the basic benefits of post office savings account are as follows:
Account can be operated by minors over the age of 10 years
Nomination facilities are accessible at the time of account opening and after account opening as well.
One can claim a tax deduction up to Rs 10,000 per year
Income tax exemption is applicable under the provisions of section 80L of the Income Tax Act for the interest received.
It is possible to transfer an account from one post office to another and a single account can be converted to a joint account as well./
In CBS Post offices, deposits and withdrawals can be done by any online format.
Features of post office savings account
Customers willing to open a savings account have access to the following features:
One can avail for check facility for his or her existing account
CBS Post Offices can issue ATM/Debit cards to those account holders who have preserved the specified minimum balance on the day of issuance of the debit card.
Minors can use the Post Office Savings Account. An account can be opened in their name for minors under the age of 10, but the guardian will be granted the freedom to run the account on their behest. The account can be managed itself by minors aged 10 years and over.
At the time of opening the account, the facility to nominate someone is provided under these accounts. The depositor can also opt to nominate a person at any time to receive the benefits of this account after their demise.
Under the joint account facility, two or three adults are permitted to keep an account together. It’s possible to turn a single account into a joint account and conversely.
You only need to make one deposit or withdrawal within 3 financial years in order to keep the account active. The account will not be considered dormant until for 3 financial years if there are no transactions made.
Withdrawal from post savings account
The balance deposited can be withdrawn at any time as per the depositor’s standards. All deposits/withdrawals should only be in rupees as a whole. At Rs 50, the minimum withdrawal limit is set. No withdrawal will be allowed if the account has balance lower than Rs 500. If the account balance is not increased to Rs. 500 at the end of the financial year, Rs. 100 will be withheld as Account Maintenance Fees and the account will automatically be discontinued if the account balance becomes zero.
Service charges applicable on post office savings account
Bear in mind that a few service charges are also available if you wish to open a post office savings scheme:
Rs 50 to issue a duplicate cheque book
Rs 20 to issue a deposit receipt
Rs 20 to issue an account statement
Rs 50 to cancel or change nomination
Rs 10 to register for a new passbook
No fee will be charged for up to 10 leaves in a fiscal year to issue a new cheque book. Rs 2 will be imposed to issue a cheque leaf after a fiscal year.
Rs 100 to transfer an account
Cheque dishonor fee: Rs 100
How to open a post office savings account online and offline?
India Post Office Post Office savings accounts can be opened online or offline. You must visit the branch, fill up the application form and submit KYC documents to open the Post Office offline.
Online process
Visit the official portal of post office and navigate to the ‘Savings Account’ tab and click on ‘Apply Now’
Now enter the required details such as Name, Contact number, Date of Birth, Address etc. and click on ‘Submit’
As required by the bank, verify the details with documents such as PAN and Aadhaar or any other identity proof.
All the KYC-documents submitted will be verified by the Post Office Executive.
The Post Office will provide you with the welcome kit containing a debit cum ATM card, PIN and cheque book after the successful authentication of your documents.
You can register your mobile number once the account is enabled and use a debit card and cheque book./
Offline procedure
Visit your nearest post office or India Post’s official portal and get the application form to proceed.
Fill out the application form completely with all required details.
Provide the necessary KYC documents including a passport size photograph.
Your account will activate within a week or so, and via a call/SMS/email, the bank will notify you about it.
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On FDs ranging from 7 days to 10 years, Jana Small Finance Bank provides 2.5 percent to 7.25 percent interest. On these deposits, senior citizens have an additional 50 basis points. For deposits with a maturity period of 3 years or less than 5 years, the bank offers the maximum interest rate. The interest rate 7.25% is for the general public and 7.75% for senior citizens. The bank gives 7 percent on deposits maturing in 1 year to 3 years, and more than 5 years.
Tenure
ROI in % for general public
ROI in % for senior citizens
7-14 days
2.50%
3.00%
15-60 days
3.00%
3.50%
61-90 days
3.75%
4.25%
91-180 days
4.50%
5.00%
181-364 days
6.00%
6.50%
1 Year 365 Days
6.75%
7.25%
> 1 Year – 2 Years
7.00%
7.50%
>2 Years-3 Years
7.00%
7.50%
> 3 Year- < 5 Years
7.25%
7.75%
> 5 Years – 10 Years
6.50%
7.00%
North East Small Finance Bank FD
On FDs maturing in 7 days to 10 years, North East Small Finance Bank provides interest rates ranging from 3 percent to 7.5 percent. The bank offers the highest interest rate on deposits maturing up to less than 1095 days in 730 days. These deposits will draw 7.5% interest for general customers and 8% interest for senior citizens. The bank offers 7 percent interest rates on FDs maturing around 365 days to 729 days.
Tenure
ROI in % for general public
ROI in % for senior citizens
7-14 Days
3.00
3.50
15-29 Days
3.00
3.50
30-45 Days
3.25
3.75
46-90 Days
4.00
4.50
91-180 Days
4.50
5.00
181-364 Days
5.25
5.75
365 days to 729 days
7.00
7.50
730 days to less than 1095
7.50
8.00
1096 days to less than 1825 days
6.50
7.00
1826 days to less than 3650 days
6.25
6.75
Suryoday Small Finance Bank FD
For general customers, the Suryoday Bank FD rate varies from 4 percent to 7.50 percent. On deposits maturing in 5 years, the bank offers the best interest rate. These investments will attract a 7.50 percent interest rate. The interest rate of Suryoday Bank FD for senior citizens varies from 4.5 percent to 8 percent. On deposits maturing in 5 years, the bank offers the best interest rate. These deposits will attract an interest rate of 8% respectively.
Tenure
ROI in % for general public
ROI in % for senior citizens
7 days to 14 days
4.00
4.50
15 days to 45 days
4.00
4.50
46 days to 90 days
5.00
5.50
91 days to 6 months
5.50
6.00
Above 6 months to 9 months
6.25
6.75
Above 9 months to less than 1 year
6.50
7.00
1 years to 2 years
6.75
7.25
Above 2 years to less than 3 years
7.15
7.65
Above 3 years to less than 5 years
7.25
7.75
5 years
7.50
8.00
Above 5 years to less than 10 years
7.00
7.50
Utkarsh Small Finance Bank FD
Utkarsh Small Finance Bank provides the general public with interest rates ranging from 3 percent to 7 percent and 3.50 percent to 7.50 percent for senior citizens on FDs that mature in 7 days to 10 years. With a maturity period of 700 days, the bank offers the best interest rate on deposits. Such deposits will provide 7.5 percent interest for senior citizens. The interest rate will be 7 percent for the general customer.
Tenure
ROI in % for general public
ROI in % for senior citizens
7 Days to 45 Days
3.00%
3.50%
46 Days to 90 Days
3.25%
3.75%
91 Days to 180 Days
4.00%
4.50%
181 Days to 364 Days
6.00%
6.50%
365 Days to 699 Days
6.75%
7.25%
700 Days
7.00%
7.50%
701 Days to 3652 Days
6.75%
7.25%
Eligibility criteria
A resident of India can open a senior citizen’s fixed deposit. That being said, NRI senior citizens, with the support of NRE or NRO accounts, can also open these FDs. At the time opening a fixed deposit account, you will need to be over the age of 60 years. Some banks often allow senior citizens over 55 years of age who have retired early or voluntarily to opt for this type of FD scheme. This concept is applicable to specific terms and conditions and can vary from bank to bank.
Taxation
In the context of fixed deposits, banks and NBFCs subtract tax from the accumulated interest before being credited in the hands of the depositor. TDS is charged as the interest accrues, i.e. monthly, quarterly, half-yearly or annually, in the case of cumulative interest payments. Tax is withheld on the received interest for senior citizens @ 10 percent as the interest reaches Rs. 50,000 as compared to Rs. 40,000 for the general public.
On FDs ranging from 7 days to 10 years, Jana Small Finance Bank provides 2.5 percent to 7.25 percent interest. On these deposits, senior citizens have an additional 50 basis points. For deposits with a maturity period of 3 years or less than 5 years, the bank offers the maximum interest rate. The interest rate 7.25% is for the general public and 7.75% for senior citizens. The bank gives 7 percent on deposits maturing in 1 year to 3 years, and more than 5 years.
Tenure
ROI in % for general public
ROI in % for senior citizens
7-14 days
2.50%
3.00%
15-60 days
3.00%
3.50%
61-90 days
3.75%
4.25%
91-180 days
4.50%
5.00%
181-364 days
6.00%
6.50%
1 Year 365 Days
6.75%
7.25%
> 1 Year – 2 Years
7.00%
7.50%
>2 Years-3 Years
7.00%
7.50%
> 3 Year- < 5 Years
7.25%
7.75%
> 5 Years – 10 Years
6.50%
7.00%
North East Small Finance Bank FD
On FDs maturing in 7 days to 10 years, North East Small Finance Bank provides interest rates ranging from 3 percent to 7.5 percent. The bank offers the highest interest rate on deposits maturing up to less than 1095 days in 730 days. These deposits will draw 7.5% interest for general customers and 8% interest for senior citizens. The bank offers 7 percent interest rates on FDs maturing around 365 days to 729 days.
Tenure
ROI in % for general public
ROI in % for senior citizens
7-14 Days
3.00
3.50
15-29 Days
3.00
3.50
30-45 Days
3.25
3.75
46-90 Days
4.00
4.50
91-180 Days
4.50
5.00
181-364 Days
5.25
5.75
365 days to 729 days
7.00
7.50
730 days to less than 1095
7.50
8.00
1096 days to less than 1825 days
6.50
7.00
1826 days to less than 3650 days
6.25
6.75
Suryoday Small Finance Bank FD
For general customers, the Suryoday Bank FD rate varies from 4 percent to 7.50 percent. On deposits maturing in 5 years, the bank offers the best interest rate. These investments will attract a 7.50 percent interest rate. The interest rate of Suryoday Bank FD for senior citizens varies from 4.5 percent to 8 percent. On deposits maturing in 5 years, the bank offers the best interest rate. These deposits will attract an interest rate of 8% respectively.
Tenure
ROI in % for general public
ROI in % for senior citizens
7 days to 14 days
4.00
4.50
15 days to 45 days
4.00
4.50
46 days to 90 days
5.00
5.50
91 days to 6 months
5.50
6.00
Above 6 months to 9 months
6.25
6.75
Above 9 months to less than 1 year
6.50
7.00
1 years to 2 years
6.75
7.25
Above 2 years to less than 3 years
7.15
7.65
Above 3 years to less than 5 years
7.25
7.75
5 years
7.50
8.00
Above 5 years to less than 10 years
7.00
7.50
Utkarsh Small Finance Bank FD
Utkarsh Small Finance Bank provides the general public with interest rates ranging from 3 percent to 7 percent and 3.50 percent to 7.50 percent for senior citizens on FDs that mature in 7 days to 10 years. With a maturity period of 700 days, the bank offers the best interest rate on deposits. Such deposits will provide 7.5 percent interest for senior citizens. The interest rate will be 7 percent for the general customer.
Tenure
ROI in % for general public
ROI in % for senior citizens
7 Days to 45 Days
3.00%
3.50%
46 Days to 90 Days
3.25%
3.75%
91 Days to 180 Days
4.00%
4.50%
181 Days to 364 Days
6.00%
6.50%
365 Days to 699 Days
6.75%
7.25%
700 Days
7.00%
7.50%
701 Days to 3652 Days
6.75%
7.25%
Eligibility criteria
A resident of India can open a senior citizen’s fixed deposit. That being said, NRI senior citizens, with the support of NRE or NRO accounts, can also open these FDs. At the time opening a fixed deposit account, you will need to be over the age of 60 years. Some banks often allow senior citizens over 55 years of age who have retired early or voluntarily to opt for this type of FD scheme. This concept is applicable to specific terms and conditions and can vary from bank to bank.
Taxation
In the context of fixed deposits, banks and NBFCs subtract tax from the accumulated interest before being credited in the hands of the depositor. TDS is charged as the interest accrues, i.e. monthly, quarterly, half-yearly or annually, in the case of cumulative interest payments. Tax is withheld on the received interest for senior citizens @ 10 percent as the interest reaches Rs. 50,000 as compared to Rs. 40,000 for the general public.
REITs share similarity with mutual fund schemes in the sense that herein investors aggregate funds for investment in underlying securities which are from the real estate sector. Nonetheless, the structure, as well as the functioning of REITs, is altogether different from mutual funds and it is basically a trust which owns investment in real estate via an SPV or special purpose vehicle.
Now getting ahead with the details on the Brookfield REIT IPO:
Issue details:
Investors can bid for a minimum of 200 units and in multiples of 200 units thereafter. The issue closes on February 5, 2021. Morgan Stanley, BofA Securities, Citigroup, and HSBC Securities are the Global Coordinators and Lead Managers of the issue. Its Lead Managers from India are Ambit, Axis Capital, JM Financial, IIFL Securities, JP Morgan India, SBI Capital, and Kotak Mahindra Capital.
Axis Trustee Services Ltd is the trustee of the issue, while Brookprop Management Services Private Limited is the manager.
The company already has amassed Rs 1,710 crore from anchor investors. Investors subscribed to 62,180,800 equity share at Rs 275 per unit, the higher price band. Post the issue, shareholding of promoters in the company will reduce to 54.4 percent.
Company profile:
Brookfield is a global investment firm and its REIT is the only cent percent institutionally managed public, commercial real estate vehicle in India. In the REIT, the company is providing 14 million square feet of its commercial portfolio.
The REIT’s initial portfolio comprises four big campus-format office parks that are based in Mumbai, Gurugram, Noida and Kolkata.
If successfully subscribed, the Brookfield REIT will become the third listed REIT in the country.
Issue objectives:
The net proceeds from the public issue will be utilized for partial or full pre-payment or scheduled repayment of the existing loan and general corporate purposes.
“Post the utilisation of the net proceeds from the Offer, their total outstanding indebtedness in principal amount is expected to be less than 18.5 percent of their initial market value, providing them a significant financial flexibility to grow through economic cycles,” said domestic brokerage Sharekhan.
“At Rs 275 per unit, it is expected to give a pre-tax yield of 7.95 percent in FY22 and 8.43 percent in FY23. However, the payout of the first year will have an 85 percent interest component (taxable in hands of investor) and 15 percent dividend (tax-free). The interest component will be reduced over time as the dividend component increases,” the brokerage added.
Brokerage recommendation on the Brookfield REIT IPO:
“Though the REIT has incurred losses in FY20 and has not paid out any dividends, they expect to pay a yield of 7.5% in FY23 which we believe is aggressive and may be difficult to achieve. Post the IPO there will also be a debt reduction of Rs 3,575 crore for the company which will bring down the overall debt. However, due to the current uncertainties around Covid-19 and the proliferation of work from home, we expect that demand for commercial real estate to be muted,” Angel Broking said. Further the brokerage has given a ‘neutral’ call on the issue on the back of uncertain environment, weak financials and high debt on the books.
In the views of Tushar Rane Executive Director – Capital Markets (Core Assets), Knight Frank India, REITs will help mobilize funds and augment the capital flow into the real estate sector and at the same time encourage retail investors participation in the asset category.
Recurring deposits (RD) are a prominent savings option among investors to fixed deposits and long-term post office schemes. Every month, one has to invest a certain amount for a specified term in a recurring deposit. The maturity amount is payable out to the individual at the completion of the tenure, which comprises the invested principal and the interest received. RD falls handy because you don’t have a lump sum to invest for a short-term purpose, since it aims to invest a certain amount per month. Risk-averse investors with low risk appetite looking for guaranteed returns may consider an RD to build a portfolio to achieve the short-term financial target.
Either with a bank or the post office, one can open a recurring deposit account. The minimum deposit ranges from bank to bank, and a minimum amount of Rs 500 or Rs 1,000 may usually be deposited. In general, tenure extends from 6 months to a period of 10 years. In certain banks, the minimum term may be 12 months for online RD. For post office RDs, the capital amount is lower at Rs 10 per month, but the term of the fund is 5 years. The RD account can either be enabled offline by visiting a bank where you have a savings account or by signing in to the net banking portal of the bank. One needs to visit the nearest post office in order to open the RD in the post office.
Procedure to open an SBI RD account online
To open a RD account in SBI, follow the below-listed steps:
First sign in your online SBI account and click on the e-RD (RD) / e-SBI Flexi Deposit button under the Fixed Deposit menu.
Select e-RD (Recurring Deposit) on the page that opens, and click on the ‘Proceed’ icon to proceed.
You will be now redirected to the next page where your active SBI accounts will be displayed.
Select the account from which you are willing to invest towards your SBI RD account and enter the amount that you want to deposit monthly. Click on the provided tick box if you are a senior citizen.
Now select the tenure for which you want to open an RD account. Remember that the minimum tenure of the RD account is 1-year. Click on the button ‘View Interest Rate: Domestic Term Deposit’ to view the tenure-wise rate of interest.
Select the “Payback Principal and Interest” option to get the maturity amount deposited into your savings account. Or else, choose the “Convert to STDR” option if you choose to turn the maturity amount to FD.
Click on the “I accept the terms and conditions” and click on the ‘Submit’ button.
The name of the nominee specified in the savings bank account will appear on a page with all the specifics that you have entered.
Now click on ‘Yes’ if you are willing to keep the same nominee for your RD account or else select the option “Do you want the nominee/s to be mapped to your term deposit account” and confirm.
Notification for confirming same m=nominee and opening of your RD account including rate of interest, maturity date and maturity amount and all other related specifics will be confirmed on a page. By clicking on the “View/Print” option, you can print the page.
Click on the ‘Set SI’ button to deposit the monthly amount automatically.
You will be now redirected to a new page where you will get the specifics of installment amount, date of payment, your RD account along with the account from which monthly installment will be paid, number of installments and so on. Click on the “Confirm” button to open the auto-pay service after verifying the specifics.
Key takeaways of SBI RD scheme
An individual can reap a plethora of benefits from SBI RD scheme, some of them are as follows:
A loan against the balance invested in his or her RD can be used by individuals. An amount up to 90 percent available in the RD account can be availed as a loan. Apart from the loan facility, SBI even allows overdraft facility against the RD account.
The maturity period ranges between 12 months and 120 months for the deposit. Consequently, unlike other RDs, at the mercy of the account holder, the recurring deposit provided by SBI can also be used as a long-term investment option.
One can prefer to use an RD nomination service, in which their spouse or other family members can be chosen to be the nominee of the final amount accrued in the RD.
SBI enables minimum deposits on their RD account for multiples of Rs. 100. Individuals from every SBI bank branch can use the facilities of the SBI RD scheme.
Applicable charges/penalties on SBI RD account
Based on some conditions SBI imposes some penalties/charges on RD accounts. Some are as follows:
Individuals keeping an account for a period of five years or longer will be levied a penalty of Rs. 1 for every Rs. 100 if the due monthly instalment is not paid.
Similarly, the penalty imposed will be Rs. 2 on every Rs. 100 if the account is kept for a period of 5 years or more.
A service charge of Rs. 10 will be imposed on individuals who have three or more consecutive failures in the payment of monthly instalments when the RD account hits the maturity period.
The account will be terminated with the amount paid to him/her prematurely in case the individual lacks to render six consecutive payments towards his or her RD account.
Taxation on SBI RD account
According to the Income Tax Act, 1961, RD is subject to taxation. The amount invested in an RD is liable for in the annual income of an individual, and the interest received on it earns 10 percent of TDS or Source Tax Deduction. That being said, TDS on RD is only effective if in a fiscal year the gross interest received is over Rs. 10,000. By submitting Form 15H or Form 15G, individuals can avoid TDS applicable to their interest income. Individuals can, however, confirm that they submit the forms to take advantage of the tax deductions before filing their income tax returns.
SBI RD Rates
Tenure
ROI in % for general public
ROI in % for senior citizens
1 year to 1 year 364 days
5.00
5.50
2 years to 2 years 364 days
5.10
5.60
3 years to 4 years 364 days
5.30
5.80
5 years to 10 years
5.40
6.20
For investment related articles, business news and mutual fund advise
RBI’s September 2016 circular mandated that, with effect from April 2018, banks would need to continue providing for loans sold as if they still were on the books.
Lenders, backed by government, could approach the Reserve Bank of India (RBI) for relief on provisioning for assets sold to the proposed asset reconstruction committee (ARC). They are expected to seek a relaxation of the September 1, 2016, circular which requires them to provide for an asset, assigned to ARCs, as if it were still on their books. Moreover, they are likely to ask the ARC be exempt from making future provisions for the assets it buys.
Experts observed that given banks are already holding a fairly high level of provisions incentives were needed to push banks to sell loans via a 15:85 model. The model implies that the sellers get 15% as upfront cash payments and security receipts (SR) for the remaining 85% of the value.
Should these exemptions be granted, it will give the new institution an upper hand over existing players, experts said.
Finance minister Nirmala Sitharaman said in her Budget speech on Monday an ARC would be set up to help banks deal with bad loans and later clarified the government would not be funding it. However, financial services secretary Debasish Panda has hinted at provisioning relief being offered through a government guarantee. Panda told reporters on Tuesday sales to the new ARC would be a cash-neutral transaction for banks. Since the regulator may insist on provisioning to support this arrangement, banks may request the government for a guarantee that could satisfy the regulator, Panda said.
RBI’s September 2016 circular mandated that, with effect from April 2018, banks would need to continue providing for loans sold as if they still were on the books. The rule was applicable if the SRs received in the sale comprised more than 10% of bank’s own bad loans. Consequently, hybrid cash-and-SR deals have dried up and banks have been offering bad loans to ARCs almost exclusively on an all-cash basis.
The new ARC will have the advantage of the loan exposures being clubbed across banks, although this, too, is prone to challenges. Industry executives FE spoke to said banks hold varying levels of provisions against the same asset and that would complicate the process. A senior executive in the stressed assets market believes private banks may not want to transfer the asset at book value. Implementation issues apart, he pointed out that no lender would want to make additional provisions if the asset is to be transferred in a 15:85 structure.
Recurring deposits (RD) are a prominent savings option among investors to fixed deposits and long-term post office schemes. Every month, one has to invest a certain amount for a specified term in a recurring deposit. The maturity amount is payable out to the individual at the completion of the tenure, which comprises the invested principal and the interest received. RD falls handy because you don’t have a lump sum to invest for a short-term purpose, since it aims to invest a certain amount per month. Risk-averse investors with low risk appetite looking for guaranteed returns may consider an RD to build a portfolio to achieve the short-term financial target.
Either with a bank or the post office, one can open a recurring deposit account. The minimum deposit ranges from bank to bank, and a minimum amount of Rs 500 or Rs 1,000 may usually be deposited. In general, tenure extends from 6 months to a period of 10 years. In certain banks, the minimum term may be 12 months for online RD. For post office RDs, the capital amount is lower at Rs 10 per month, but the term of the fund is 5 years. The RD account can either be enabled offline by visiting a bank where you have a savings account or by signing in to the net banking portal of the bank. One needs to visit the nearest post office in order to open the RD in the post office.
Procedure to open an SBI RD account online
To open a RD account in SBI, follow the below-listed steps:
First sign in your online SBI account and click on the e-RD (RD) / e-SBI Flexi Deposit button under the Fixed Deposit menu.
Select e-RD (Recurring Deposit) on the page that opens, and click on the ‘Proceed’ icon to proceed.
You will be now redirected to the next page where your active SBI accounts will be displayed.
Select the account from which you are willing to invest towards your SBI RD account and enter the amount that you want to deposit monthly. Click on the provided tick box if you are a senior citizen.
Now select the tenure for which you want to open an RD account. Remember that the minimum tenure of the RD account is 1-year. Click on the button ‘View Interest Rate: Domestic Term Deposit’ to view the tenure-wise rate of interest.
Select the “Payback Principal and Interest” option to get the maturity amount deposited into your savings account. Or else, choose the “Convert to STDR” option if you choose to turn the maturity amount to FD.
Click on the “I accept the terms and conditions” and click on the ‘Submit’ button.
The name of the nominee specified in the savings bank account will appear on a page with all the specifics that you have entered.
Now click on ‘Yes’ if you are willing to keep the same nominee for your RD account or else select the option “Do you want the nominee/s to be mapped to your term deposit account” and confirm.
Notification for confirming same m=nominee and opening of your RD account including rate of interest, maturity date and maturity amount and all other related specifics will be confirmed on a page. By clicking on the “View/Print” option, you can print the page.
Click on the ‘Set SI’ button to deposit the monthly amount automatically.
You will be now redirected to a new page where you will get the specifics of installment amount, date of payment, your RD account along with the account from which monthly installment will be paid, number of installments and so on. Click on the “Confirm” button to open the auto-pay service after verifying the specifics.
Key takeaways of SBI RD scheme
An individual can reap a plethora of benefits from SBI RD scheme, some of them are as follows:
A loan against the balance invested in his or her RD can be used by individuals. An amount up to 90 percent available in the RD account can be availed as a loan. Apart from the loan facility, SBI even allows overdraft facility against the RD account.
The maturity period ranges between 12 months and 120 months for the deposit. Consequently, unlike other RDs, at the mercy of the account holder, the recurring deposit provided by SBI can also be used as a long-term investment option.
One can prefer to use an RD nomination service, in which their spouse or other family members can be chosen to be the nominee of the final amount accrued in the RD.
SBI enables minimum deposits on their RD account for multiples of Rs. 100. Individuals from every SBI bank branch can use the facilities of the SBI RD scheme.
Applicable charges/penalties on SBI RD account
Based on some conditions SBI imposes some penalties/charges on RD accounts. Some are as follows:
Individuals keeping an account for a period of five years or longer will be levied a penalty of Rs. 1 for every Rs. 100 if the due monthly instalment is not paid.
Similarly, the penalty imposed will be Rs. 2 on every Rs. 100 if the account is kept for a period of 5 years or more.
A service charge of Rs. 10 will be imposed on individuals who have three or more consecutive failures in the payment of monthly instalments when the RD account hits the maturity period.
The account will be terminated with the amount paid to him/her prematurely in case the individual lacks to render six consecutive payments towards his or her RD account.
Taxation on SBI RD account
According to the Income Tax Act, 1961, RD is subject to taxation. The amount invested in an RD is liable for in the annual income of an individual, and the interest received on it earns 10 percent of TDS or Source Tax Deduction. That being said, TDS on RD is only effective if in a fiscal year the gross interest received is over Rs. 10,000. By submitting Form 15H or Form 15G, individuals can avoid TDS applicable to their interest income. Individuals can, however, confirm that they submit the forms to take advantage of the tax deductions before filing their income tax returns.
SBI RD Rates
Tenure
ROI in % for general public
ROI in % for senior citizens
1 year to 1 year 364 days
5.00
5.50
2 years to 2 years 364 days
5.10
5.60
3 years to 4 years 364 days
5.30
5.80
5 years to 10 years
5.40
6.20
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The monthly income scheme of the post office is for a term of 5 years. The interest rate on the monthly income scheme of the Post Office is currently 6.6 percent per annum and paid on a monthly basis. By depositing a minimum amount of Rs. 1000 and a multiple of Rs. 100, one can invest in this scheme and this amount can go up to Rs. 4.50 lakh in the case of a single holder and Rs 9 lakh in the case of a joint holder. Interest is payable at the end of the month from the date of opening and so on until maturity. In the event of any additional deposit made by the depositor, the excess investment will be refunded and only the interest of the PO Savings Account will be repaid from the date of opening of the account to the refund date. No premature withdrawal is approved under POMIS before the maturity date of 1 year from the date of deposit. A penalty of 2% from the principal will be deducted in case the POMIS account is closed after 1 year and before 3 year from the date of account. Whereas the penalty is kept at 1% if the account is closed after 3 year and before 5 year from the date of account opening.
Senior Citizens Savings Scheme
The assured return is for 5 years in the SCSS. SCSS can, therefore, be extended for 3 years after completion of the maturity period, but the existing interest rate will apply. Currently, the SCSS interest rate is 7.4 percent per annum and is paid on a quarterly basis. Only those over the age of 60 can invest in SCSS and in Rs 1000/- and Rs 15 lakhs respectively with the minimum and maximum deposit is capped. In the event of any excess deposit made to the SCSS account, the excess balance will be automatically refunded to the depositor and only the interest rate of the PO Savings Account will be valid from the date of the excess deposit to the refund date. Deposit under this scheme counts for the tax benefit under section 80C of Income Tax Act, 1961. The account can be closed prematurely any time after the opening date, but if the account is closed within 1 year, no interest will be accrued, and if any interest charged in the account is retrieved from the principal amount. Likewise, an amount equal to 1.5 percent will be withheld from the principal amount if the account is closed after 1 year but prior to 2 years from the date of opening. Consequently, if the account is closed after 2 years but within 5 years from the date of launch, an amount equivalent to 1% of the principal amount will be withheld. The account can be closed after 5 years from the date of opening by submitting to the appropriate post office a specified application form with a passbook.
Pradhan Mantri Vaya Vandana Yojana
Deposits can be made in Pradhan Mantri Vaya Vandana Yojana (PMVVY) for 10 years and the return for the year 2020-21 is 7.40 percent per annum. Pradhan Mantri Vaya Vandana Yojana (PMVVY) is a pension scheme introduced specifically for senior citizens aged 60 years and above by the Government of India, effective from 4 May 2017 to 31 March 2020. The scheme now has been extended to 31 March 2023 for a period of 3 years after 31 March 2020. The pension is due at the end of each year over the 10-year policy period, in compliance with the monthly/quarterly/half-yearly/annual frequency selected by the pensioner at the date of acquisition. The purchase price along with the final pension contribution shall be due in respect of the existence of the pensioner up to the expiration of the policy duration of 10 years. After 3 policy years, a loan of up to 75 percent of the purchase price is allowed to cover emergency needs. The purchase amount shall be due to the recipient upon the demise of the pensioner within the 10-year period of the policy. Via the official portal of LIC (http://www.licindia.in/) you can open and manage this scheme.
Bank FDs
Currently, certain banks deliver a return of around 7 to 8% over different periods on FDs. From as low as 7 days to a term of 10 years, one can invest in Bank FD. In banks, the 5-year tax saving FD is also accessible. There is an additional rate of interest of 0.5 per cent per annum for senior citizens. Many small finance banks give investors a marginally higher return rate. In bank FDs, the interest rate can be kept on a monthly, quarterly, semi-annual or annual basis. There are several corporate banks that provide up to 9 percent of FDs as well, apart from small finance banks and major commercial banks.
Our take
The earning potential of your hard-earned money is eroded by inflation. It is important to offset inflation by receiving a favorable investment return. A bank FD allows you to receive a higher interest rate that can allow you to generate higher returns. As in the case of market-linked securities, the yields on a bank FD are fixed and there is no chance of any risk. A bank FD is one of the suitable options if you are cautious or averse to risk and want to generate fixed returns to meet the envisaged financial goals. Similarly, if the tenure is wisely picked, a bank FD can also pay attention to your liquidity needs and tackle short-term goals. You can also consider a Tax Saver bank FD for tax relief, and get a tax gain under Section 80C of the Income Tax Act, 1961. In her 2020 budget speech, Union Finance Minister Nirmala Sitharaman proposed that bank deposit cover in designated commercial banks should be raised to Rs 5 lakh per depositor from the existing Rs 1 lakh. Deposits with all commercial banks and cooperative banks are currently covered under the Deposit Insurance and Credit Guarantee Corporation (DICGC). Under DICGC, only primary cooperative organizations are not covered.
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