The dream home dilemma – The Hindu BusinessLine

Personal Finance

[ad_1]

Read More/Less


Alka and Shobhit Mehra, aged 43, live in Mumbai. Shobhit has risen to become the head of the risk solutions group at a consulting firm, while Alka is an acclaimed fiction writer. Their son Rahul (13) and daughter Meera (10) study at a premier international school.

Alka has set her heart on a recently constructed apartment building in the premium Bandra (West) suburb, which has a four-bedroom sea-facing apartment that will cost ₹10 crore. The Mehras can’t expect more than ₹4 crore from the sale of their existing house.

The move will mean wiping clean their accumulated portfolio which is currently worth ₹3 crore (all in equity and balanced funds) and taking a home loan of another ₹3 crore.

Shobhit’s take-home pay after deductions works out to ₹6 lakh per month which pays for their monthly expenses of ₹2 lakh, their annual international vacation that typically costs ₹8 lakh and annual school fees of ₹8 lakh per child per annum.

 

Until last year, Shobhit was servicing EMIs on their Santacruz apartment, which took up another ₹ 1.5 lakh per month. He finally became debt-free only recently and is uncomfortable about taking on a large home loan at this stage in his career.

His annual bonus (₹25-30 lakh pre-tax in the last two years) is what he has been investing in recent years.

Alka’s earnings as a writer have been erratic. Her income-tax returns in recent years show a wide range of professional income — from ₹21 lakh to ₹1.08 crore per annum.

Difference of opinion

Shobhit’s view is that they should be saving up for their children’s overseas higher education and wedding expenses, and for their own retirement.

Alka’s view is that Shobhit is denying his family the lifestyle that she believes they deserve and can afford. He still has a good 20 years of work left in him and so does she.

On her part, Alka is willing to be less erratic with her writing commitments — if it means extra income to pay down a home loan for a house she yearns for. Shobhit believes that hoping for a mercurial income stream to suddenly become steady and strong borders on wishful thinking.

Here’s the advice we gave Shobhit and Alka.

Assumptions

But first the assumptions. The rate of inflation is 10 per cent per annum for education, wedding expenses and cost of living.

The rate of return per annum is 15 per cent from equity, 7 per cent from debt, 5 per cent from gold and 10 per cent from real estate. The retirement age of Shobhit and Alka is 60 years and their life expectancy is 85 years.

The higher education fees is ₹30 lakh each year for graduation (four years) and ₹60 lakh each year for post-graduation (two years). The wedding expense is ₹50 lakh per child. Shobhit’s and Alka’s incomes are assumed to increase annually by 10 per cent and 6 per cent, respectively.

Based on the above assumptions, the likely expenses towards various goals are as given in the accompanying table.

Recommendations

So, here’s what we recommended based on the two case scenarios — one, don’t buy the new house, and two, buy the new house.

Case 1: Don’t buy new house

Their current portfolio is 100 per cent in equity. It is recommended to diversify the portfolio by investing in different asset classes so that risk may be minimised. The recommended portfolio is 70 per cent equity, 20 per cent debt, 5 per cent gold and 5 per cent real estate. The expected weighted average return from recommended portfolio is 12 per cent per annum with the deviation of +/- 9.45 per cent, assuming 10+ years of holding period. The expected weighted average returns on a more conservative corpus post-retirement is 9 per cent per annum.

Three years before the occurrence of any financial goal, the pre-decided amount will be shifted from the recommended portfolio to a liquid/short-term debt fund. Seventy per cent of the yearly savings will be invested in the diversified portfolio.

Shobhit should purchase a term insurance cover of ₹7 crore and Alka should purchase a cover of ₹3 crore. They should also purchase a health insurance cover of ₹20 lakh with a critical illness rider of ₹20 lakh.

They should also maintain an emergency corpus of ₹25 lakh at all times. This emergency fund is recommended to be invested in either liquid or ultra-short term debt funds and can be used for any unplanned expenses. Given the above, all the financial goals of the family can be met.

Case 2: Buy the new house

The EMI for the new flat will be ₹2,93,344. Annual savings will come down by almost 50 per cent. Since the existing mutual funds will be used to finance the house, the available provisions will come down to nil. The revised insurance cover required will be ₹16 crore. In this case, Shobit has to either depend on his employee for extra insurance cover or take an additional life insurance cover.

Unlike in the previous case, the emergency corpus can be reserved only for either medical emergencies or EMIs in case of job loss or unplanned events.

It is assumed that 70 per cent of annual savings are invested in the recommended portfolio every year till Shobhit and Alka turn 60.

If the couple purchases the house by taking a loan, there is a high probability that they may run out of their retirement corpus by the time they turn 70 year of age. Excluding retirement planning, all other financial goals of the Mehra family are achievable even if the couple decides to buy the property.

If all the goals are to be met, Alka is required to increase her annual post tax income to ₹81 lakh, maintaining a constant increment of at least 6 per cent per annum. If Alka’s increase in income does not increase to this level, the new property could be used to get regular income by opting for reverse mortgage when they turn 65 years of age. This should cover the deficit in the retirement corpus.

The writer is CEO and MD of TrustPlutus Wealth Managers (India)

[ad_2]

CLICK HERE TO APPLY

Leave a comment , , , , ,

What is Tax Collection at Source (TCS)? Here’s a primer

Personal Finance

[ad_1]

Read More/Less


There are certain new tax collection at source (TCS) rules that came into force from October 1, 2020 under the Income Tax Act 1961. While many of these provisions relate to goods and services, there are some that directly impact individuals. Before we get into how these provisions impact you, let us understand the ‘what’ and ‘how’ of TCS.

What is TCS?

Tax collection at source is the Income Tax Department’s way of sifting out certain high-value transactions under section 206C of the Income Tax Act. Transactions such as purchase of car for an amount exceeding ₹10 lakh, foreign currency remittances, and sale of goods above ₹50 lakh, among others, come under the ambit of TCS provisions.

How is TCS collected?

TCS is calculated on transactions beyond a certain threshold. Once these transactions breach that threshold, TCS is calculated on the value of the transaction. This amount is added to the transaction value and collected from the buyer or service recipient by the seller or service provider.

If the TCS to be collected is 1 per cent of a car purchased worth ₹15 lakh, then the TCS amount would be ₹15,000. You will have to pay ₹15,15,000 to the car dealer you have purchased the vehicle from.

The TCS amount will be recorded against the Permanent Account Number or PAN of the income tax assessee. This amount will be knocked off against the income tax liability of the assessee, if any, for the financial year in which the TCS was collected. Essentially, your tax outgo will reduce by the amount of TCS just like it does with tax deducted at source (TDS).

Changes from October 2020

The new amendments to the TCS provisions are relevant for those who make purchases in foreign currency, foreign currency remittances, purchase of an overseas tour package in foreign currency from a foreign tour operator, and invest in shares abroad. All these come under Reserve Bank of India’s Liberalised Remittance Scheme (LRS) that allows Indians to remit up to $2,50,000 a year abroad.

From October 1, 2020, while making purchases in foreign currency online through your debit card, credit card, or through online banking, tax will be collected at source by your bank or credit card company at 5 per cent of the value of the transaction on amounts exceeding ₹7 lakh a year. This is over and above any transaction fees that might be collected by the bank or credit card company. In case such aggregate purchases in a financial year are above ₹7 lakh, then TCS provisions will apply to the amount in excess of ₹7 lakh. This limit will be applied for transactions undertaken with an individual bank or credit card company.

For example, if you have made purchases online worth ₹15 lakh, then the TCS will not be applicable till the aggregate purchases cross ₹7 lakh. For each purchase above ₹7 lakh, TCS will be applicable. In case you have made three purchases above the threshold of ₹3 lakh, ₹3 lakh, and ₹2 lakh, then TCS on these transactions will be ₹15,000, ₹15,000 and ₹10,000. These TCS amounts will be billed to your account or credit card statement.

Then there is remittance of foreign currency for the purpose of education. The threshold for TCS applicability remains the same (above ₹7 lakh) and the rate of TCS is 5 per cent of the amount exceeding ₹7 lakh. However, there is a difference in the rate of TCS for foreign remittance for education purposes made by obtaining a loan and one made from own funds. TCS on foreign currency remittances above ₹7 lakh made for education by obtaining a loan (proofs will be demanded by the bank) will be at 0.5 per cent.

Investors who make investment in shares abroad by using the LRS will also be covered by the new TCS provisions. While making investments in shares abroad, the aggregate foreign remittance amount exceeding ₹7 lakh will be liable to TCS. The intermediary that allows you to make such investments will charge you the TCS once the total investment exceeds ₹7 lakh in a financial year.

Any other foreign currency remittance made under LRS will also be covered by the TCS provisions and the threshold limits of ₹7 lakh will apply. The TCS will be collected at 5 per cent of the value of remittance above ₹7 lakh.

For financial year 2020-21, the calculation of aggregate foreign currency remittance above ₹7 lakh will be considered from October 1, 2020 onwards only, and not for the entire financial year. From April 1, 2021 onwards, the TCS provisions will apply for the full financial year.

In case of a foreign currency remittance made for purchase of overseas tour package, there is no threshold limit of aggregate remittances of ₹7 lakh. Any such foreign currency remittance for purchase of an overseas tour package will be liable for TCS of 5 per cent.

In case the remitter of foreign exchange does not produce PAN, or the bank account does not have the PAN registered against it, TCS will be calculated at 10 per cent of the remittance amount.

[ad_2]

CLICK HERE TO APPLY

Leave a comment , , , , , ,

How good is Bajaj Finance’s Single Maturity Scheme?

Personal Finance

[ad_1]

Read More/Less


Taking cues from the systematic investment plans (SIPs) of mutual funds, Bajaj Finance launched a new FD product earlier this year — the Systematic Deposit Plan (SDP).

We reviewed the product in January this year (tinyurl.com/SDPBaj). Bajaj Finance has now launched a variant of SDP, with a ‘Single Maturity’ option.

We take a look at whether this new feature makes the cut as a worthy investment.

Recap

The SDP essentially allows a person to make regular investments, a minimum of ₹5,000 every month. Each monthly investment is treated as a separate deposit, with tenures of each deposit being 12-60 months, at the choice of the investor. In addition, investors can opt for the number of monthly deposits, ranging from six to 48.

 

All deposits under SDP are cumulative deposits, implying that the interest will be paid on maturity only. The SDP essentially helps create a laddering effect due to different FDs under SDP maturing on different dates.

The change is that this product introduced in January is now called ‘Monthly Maturity Scheme’. Alongside,the company has launched a new variant, the ‘Single Maturity Scheme’. Here, customers will receive the maturity proceeds of all the FDs created systematically, as a lump sum, in a single day. Under the Single Maturity Scheme, one can deposit for tenures between 24 and 60 months. The number of deposits (beyond the first deposit) one can opt for varies from six additional deposits to 36, depending on the tenure.

Customers opting for a tenure of 24 months (minimum tenure under Single Maturity Scheme) will be required to make six additional deposits under the SDP (after the initial deposit). For SDP of higher tenure, say, 36 months, customers can opt to pay either six or 12 additional deposits. Similarly, for a 48-month tenure, one can opt to pay six, 12 or 24 additional deposits, and for a 60-month tenure, the options available are six, 12, 24 or 36 additional deposits.

The tenure of each deposit (instalment), after the first deposit, will gradually reduce such that all of them mature on a single date. Say, you opt for a single maturity scheme of 36-month tenure and opt for six additional deposits — your first deposit will have a maturity of 36 months. The second deposit will mature in 35 months, and third/fourth/fifth/sixth/seventh deposit will mature in 34/33/32/31/30 months, respectively.

Under this scheme, every deposit will fetch interest, according to the prevailing rate of interest on the date of deposit and for the respective tenure.

Worth it or not?

Post the recent revision in rates, Bajaj Finance offers interest rates of 6.9-7.1 per cent for (cumulative) deposits ranging 12-60 months.

Customers who apply online and senior citizens get an additional interest rate of 0.1 per cent and 0.25 per cent, respectively. The company’s deposits are rated AAA.

While the rates offered by Bajaj Finance are higher than most public sector banks, a few private banks —IndusInd Bank and RBL Bank, for instance — offer rates that are 10-15 basis points (bps) higher than those offered by Bajaj Finance currently. Small finance banks offer 10-25 bps higher rates, across tenures.

That said, investing in SDP, whether single maturity or multiple maturities, may make sense only in a rising-rate scenario.

If the company revises its interest rates at regular intervals, successive instalments will be locked into higher rates.

However, if you want to maximise the interest earned, deciding the number of systematic deposits and the tenure of the instalments beforehand can be a difficult task.

The new variant of SDP — single maturity scheme — can be somewhat similar to a recurring deposit (RD). But the difference is that in an RD the interest rate is constant throughout the tenure (flexi RDs may pay out higher interest on the stepped-up amount). Also, in an RD, you are required to contribute every successive month.

Under the single maturity scheme, you don’t contribute for all the months of the tenure. You can choose the number of months you want to contribute.

In a traditional RD, banks generally charge a penalty —in the form of lowered interest rate —in the event of a delay in or non-payment of an instalment.

No such penalty applies in the case of the SDP. Delaying a month’s SDP instalment only alters the tenure of that deposit (in the case of single maturity scheme) or pushes your maturity date for that instalment further (monthly maturity scheme).

You also have the flexibility to stop investing or restart after a gap with a new ECS (electronic clearing service) mandate.

If you have a steady cash inflow which you wish to keep reinvested, this product could be an option apart from RDs.

Otherwise, it is suitable for those who cannot keep a regular watch on interest rates in the market and the rates offered by different entities.

[ad_2]

CLICK HERE TO APPLY

Leave a comment , , , , , , , , , ,

How to revive a lapsed LIC policy?

Personal Finance

[ad_1]

Read More/Less


To offer some respite to life insurance policyholders, LIC recently launched a revival campaign to ensure benefits of the policy continue. The revival campaign encourages people to renew their policy by offering concession on late fees. So, if you have a policy with LIC, then you can revive your (individual) policies between August 10 and October 9, 2020. It is applicable for eligible plans subject to certain terms and conditions. Here is what you should know.

A life insurance policy offers continued financial security to you and your family, provided you, as a policyholder, pay the premium regularly. If the premium dues are left unpaid over a long period of time, the policy may lapse and you may lose all or part of its benefit. As part of its claim clearance offer, LIC is also encouraging policyholders to get their maturity amounts if they have missed making a claim on time.

Revival

Until premium dues are settled, with interest (penalty) chargeable by the insurer as a late fee (from the due date) along with the premium amount due, the policyholder will not receive the benefits of a life policy. A policy is said to have lapsed if the premium dues are not paid even after the grace period (30 days for yearly, half-yearly and quarterly premium payment and 15 days for monthly premium payment). In case of death of the policyholder when a policy has lapsed, if the policy has acquired surrender value, then claims will be settled to that extent by the insurer. If not, the policy loses all its benefits and no claims would be settled.

Usually, insurers allow you to revive your life policies within a period of five years along with penalty. Note that the penalty will vary with each insurer. For instance, LIC charges 9.5 per cent per annum as late fee penalty on premium dues. HDFC Life, too, charges 9.5 per cent per annum as interest on premium outstanding. At the time of revival, policyholders will have to pay total premiums due plus the penalty (interest) amount to reinstate the policy benefits.

Your policy document will state whether your policy is eligible for revival if it has lapsed. Beyond five years, insurers may allow for policy revival on a case-to-case basis.

In the case of LIC, in its recent revival campaign, you get to revive certain policies within five years from the date of the first unpaid premium (from the date you stopped paying premium). It is not applicable for high risk plans, including some term insurance, health insurance and multiple risk policies. High risks policies are those that, for instance, involve repayment of double/triple sum assured on maturity. LIC is offering late fee discounts to encourage policyholders to make the premium payment. If your total premium is up to Rs 1 lakh, then you get a late fee discount of 20 per cent (on late fees) with maximum concession amount limited to Rs 1,500. For premium amount between Rs 1 lakh and Rs 3 lakh, the late fee discount is 25 per cent (maximum concession is up to Rs 2,000) and for premium above Rs 3 lakh, the late fee discount is 30 per cent (concession capped at Rs 2,500).

How to revive

Policyholders can revive the policy with the insurer directly by paying the interest charges for late payment. Keep in mind that it is left to the discretion of the insurer to accept or reject the policy (although rejection is rare). Once the policy is revived, the benefits from the policies are also reinstated.

In the case of LIC policies, you can contact the agents or visit the branch to complete the revival process. It is more or less the same for other insurers as well. You can also call your insurer’s customer care to find out about revival procedures.

But, generally, it is better to keep the policy active by paying premium dues on time. Insurance companies usually send a premium reminder through mail or message or both.

[ad_2]

CLICK HERE TO APPLY

Leave a comment , , ,

Did you inherit a property or receive it as a gift?

Personal Finance

[ad_1]

Read More/Less


There is often a lot of ambiguity on when and how you become the owner of a property that you inherited or were gifted. Unlike ownership through a sale deed, the transfer of property rights when no money is paid can have many grey areas as the required legal formalities and tax implications can often be confusing.

Legal routes

You can get ownership of a property through many routes. For example, there may be a partition of a property in which you are a joint owner and you may be become the sole owner of your part. This is usually done through a Partition Deed.

Also read: Loan options for property owners

Alternatively, in case of a joint property, you may become an owner when the other owners relinquish or surrender their rights. Relinquishment can be free or for a consideration — money or other assets. If the co-owners are family members, the transfer can be done through a Relinquishment Deed. If they are unrelated, a Release Deed is used.

In cases where you were not a joint owner, a property may be gifted to you. Unlike gifting that can happen even while the owner is alive, ownership transfer without payment commonly happens after the owner’s demise. This can be to a legal heir — with or without a Will — or to anyone through a Will.

Process aspects

Whatever the mode of transfer, you must register the instrument of transfer — Gift Deed, Transfer Deed, Relinquishment Deed, Partition Deed — with the appropriate government authority. This often requires providing proof and documentation of your claim to the property. For example, if there is no Will, you must establish you are the legal heir. The registration process involves costs and may vary between States and on the deed type, property type and value. For example, stamp duty for relinquishment is applicable only on the portion relinquished and not the full property value.

Also read: Property sale in Covid times: What sellers should know

Once the authorities establish the new owners, their share, rights and liabilities, you can apply for a property transfer at the sub-registrar’s office. After this, the ownership documents with the government authorities — such as the municipal corporation — must be updated with your name. This is through a process called mutation of records and requires the payment of various taxes, transfer of utilities, execute rent agreements and loan mortgages.

Tax considerations

Your tax implications vary based on the type of transfer. For example, property received under a Will is tax-exempted, even to non-relatives, while gifts received from non-relatives are taxable beyond ₹50,000.

For inherited property, you are liable for taxes on the profits made when it is sold. In this case, you must note that the holding period is not the date of inheritance but the actual date of purchase of the property. For instance, say you sold a property that was inherited just one year ago, but was purchased by the original buyer five years ago. The holding period is taken as six years and you are only required to pay long-term capital gains tax.

Tax filing of the income from the property also needs consideration. If the transfer is due to the demise of the owner, you must include the income from the date of acquiring. The income until the point of death is included in the tax return of the deceased person for that financial year. For the intermediate period — until transfer happens — the executors of the will are responsible for filing the income-tax returns.

Special cases

Some situations, such as an outstanding home loan against the property, require more consideration. The transfer of a mortgaged property can only happen with the written consent of the lender. That may require the loan to be transferred to the new owner or paid off.

You also become a part of any dispute or litigation involving the property. And in case of property being rented out, you must honour the original lease agreement terms.

Often, in ancestral properties, there are no ownership records. For example, the property may still be in your great-grandfather’s name and title documents may not be traceable. It may be advisable to take help and guidance to gather evidence to establish ownership, before applying for transfer.

Another special situation is if the property is a joint holding and the first name holder is no more. You must note that the second named person does not automatically become the owner, as the law of succession must be followed.

If the property is a flat that is part of a cooperative society, the ownership is in the form of shares in the society. Ownership transfer must be done with the society, even if you were appointed as a ‘nominee’. This typically requires providing the Will and consent of other legal heirs.

The author is an independent financial consultant

[ad_2]

CLICK HERE TO APPLY

Leave a comment , , , , , ,

How wellness features make your health insurance better

Personal Finance

[ad_1]

Read More/Less


Insurance regulator IRDAI has issued guidelines on wellness and preventive features offered in a health insurance policy.

While many insurers already offer wellness benefits to policyholders, the guidelines not only widen the scope of such features but also standardise them.

The Insurance Regulatory and Development Authority of India (IRDAI) has allowed insurers to offer this feature as an optional or an add-on cover or as a rider.

Here is what you, as a policyholder, should know about wellness features and their benefits.

What’s on offer?

Many insurers, including ICICI Lombard, ManipalCigna, Bajaj Allianz and Max Bupa, offer health policies with wellness features that reward the policyholders for maintaining a healthy lifestyle.

Rewards are offered, provided policyholders undertake the wellness programme specified by insurers. The rewards are in the form of points which get accumulated on completion of a task, say walking 10,000 steps in a day or running 3 km a day.

So, if you have accomplished the goal, you can redeem your reward points against outpatient consultation (OPD), pharmaceutical expenses, diagnostic services and health check-ups through the network providers of the insurer (reimbursement allowed if cashless claim is not available).

Take ICICI Lombard’s iHealth Plus policy for example. You can earn 100 points if you quit smoking.

You can also earn up to 1,000 points if you undergo medical check-up. You can redeem these points against OPD, dental expenses etc.

Similarly, in the case of Aditya Birla health plan, you can earn health returns (reward points) through accumulation of ‘Active Dayz’. If you burn 300 calories in a day, you earn one Active day.

With Bajaj Allianz General, you can redeem the accumulated points for co-pay waiver at the time of claim or increase in sum insured in case of no claim.

Note that the rewards system varies with insurers. For instance, in the case of iHealth Plus policy, the maximum points an individual can get is 5,000 and each point is equivalent to 25 paise. It can be carried forward up to three years. In the case of ManipalCigna’s ProHealth policy, the maximum reward that can be earned is 20 per cent of the premium paid and each point is valued at ₹ 1.

The points are monitored by health insurance companies on real-time basis through mobile apps or wearables such as Fitbit that track your activity.

As per IRDAI’s guidelines, in addition to the existing wellness benefits, insurers can also include redeemable vouchers to obtain protein supplements and other consumable health boosters, or for membership in gym/yoga centres.

Sweetie Salve, Vertical Head, Claim Medical Management, Bajaj Allianz General Insurance, says: “Redeemable vouchers, could typically have two approaches — where insurers proactively give these vouchers to policyholders on a complimentary basis, where it is offered to initiate a healthy lifestyle and create a sense of responsibility for maintaining good health, or policyholders may have to earn them based on certain wellness criteria.”

The regulator has also allowed insurers to offer discounts on premium and/or increase in sum insured based on the wellness regime.

As insurers are yet to file revised versions/new products with the regulator, it may take a while before the products are updated for the additional benefits. Despite the improved benefits, policyholders may not see a significant increase in premium.

Win-win

Amit Chhabra, Head, Health Insurance, Policybazaar.com, says: “While there could be some costs involved in offering wellness services, it would subsidise the claim cost for insurers as healthy customers would claim less.”

However, Priya Deshmukh-Gilbile, Chief Operating Officer, ManipalCigna Health Insurance, says: “The recent guidelines on wellness benefits have put in motion reward-linked wellness features for healthy living, and industry products incorporating discount and reward options might see some impact on premium.”

To enrol in wellness programmes, policyholders should purchase products that offer such benefits. All wellness benefits are offered through digital mode, through respective insurers’ mobile app. For instance, Max Bupa’s Health is an app that manages policyholders’ fitness data and health score.

Once downloaded and registered, you can sync your wearables such as Google Fit, Apple Watch or Fitbit with the mobile app; alternatively, the said app itself will track your fitness activity.

On the other hand, if you have enrolled yourself in a gym or yoga centre, where your fitness activities are done, you will still earn reward points for that as well.

iHealth Plus policy offers 2,500 points for a gym/yoga membership per year.

But do keep in mind that your policy selection should be based oncoverageand not just on wellness programmes and their benefits.

[ad_2]

CLICK HERE TO APPLY

Leave a comment , , , , , , , ,

How Equitas SFB beats most others in FD rates

Personal Finance

[ad_1]

Read More/Less


Following the repo rate cuts by the RBI, banks have slashed deposit rates by up to 165 basis points (bps) since the start of the year.

Even small finance banks, which lure depositors with comparatively higher rates, have lowered interest rates on deposits by more than 100 bps (year-to-date).

With rates at a multi-year low now, locking deposits in long tenures will mean missing out on higher returns when the rate cycle begins to move up. A one-year timeframe is ideal as this will give the opportunity to reinvest at better rates later.

After the latest revision of rates, done in June 2020, Equitas Small Finance Bank’s (SFB) rates are better than that of its peers. For deposits of one-year tenure, Equitas SFB offers 7.1 per cent interest per annum. Senior citizens get an extra 0.60 percentage points. The minimum deposit is stipulated at ₹5,000. Investors can choose the cumulative option.

For a similar tenure, public sector banks offer interests of 4.9-5.55 per cent, while private banks offer up to 7 per cent.

For a similar tenure, deposits rates of other small finance banks (barring Fincare Small Finance Bank), after their recent revisions, are also lower than Equitas SFB’s rates.

FDs with banks (including those with SFBs) are covered under the deposit insurance offered by the Deposit Insurance and Credit Guarantee Corporation (DICGC) for up to ₹5 lakh per bank.

Open FD online

Depositors who wish to stay home can apply online, using the Selfe deposit option (on the bank’s website). Customers can open fixed deposits (FDs) online for a tenure of up to one year only. Also, the maximum amount of FD that can be opened online is capped at ₹90,000. For opening a deposit with a higher tenure or amount, customers will have to personally contact the bank. In select regions, doorstep banking facility is available to open an FD.

The bank also permits partial or full premature withdrawals of the FD, but only after 180 days since the date of opening the deposit.

For deposits with effective tenure shorter than 180 days, a penalty of 1 per cent shall apply on premature withdrawal.

However, premature withdrawals are not permitted if the customer opts for monthly interest payouts.

About the company

Equitas Small Finance Bank, previously Equitas Finance, began operations in September 2016. The bank has about 854 outlets across the country, with vast presence in Tamil Nadu (328 banking outlets).

Tamil Nadu also accounts for about 61.9 per cent of its outstanding loan book as on June 30, 2020.

The bank is currently into micro finance, small business loans (including housing and agricultural loans) and vehicle finance. It also lends to MSEs and corporates.

As on June 30 the bank had a loan book of ₹15,573 crore, with gross NPA at 2.68 per cent. The bank’s capital adequacy ratios are well above the minimum regulatory requirement — Total CRAR and Tier-I CRAR at 21.59 per cent and 20.61 per cent, respectively.

In the wake of the pandemic, small finance banks have faced severe anomalies in their collections, predominantly those with higher exposure to micro finance.

That apart, the moratorium on loans also hints at the possibility of bad loans inching up in the coming quarters.

Equitas SFB also saw its collections efficiency drop to 49 per cent in June 2020, from 78 per cent in March 2020. Also, about 51 per cent of the bank’s customers (by value) had opted for the moratorium, as of June quarter end.

That said, according to its recent exchange filing, the bank’s collection efficiency improved to over 80 per cent in August 2020, thanks to the bank’s diversified loan book — micro finance only constitutes about 23 per cent of the loan book currently.

Also, the loan book under moratorium is only 35 per cent of gross advances at the end of August 2020.

[ad_2]

CLICK HERE TO APPLY

Leave a comment , , , , , , ,
1 … 16,273 16,274 16,275 16,276 16,277 … 16,279