awareness fridays

Having personally received one such offer through snail mail in the recent past and having witnessed a friend receive one through email, I believe this is a widespread problem. Thankfully, the Reserve Bank of India has embarked upon a public awareness campaign and has also asked banks to do the same.

From your side, please spread the word.

And, have you received such an offer too? What did you do?

Awareness Fridays is my initiative to spread awareness on topics relevant to personal finance — every Friday. I urge you to take some time off and absorb this information — it’s pretty useful. And, as always, do spread the word if you find this useful.

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From the Reserve Bank of India’s Annual Policy Statement for the Year 2010-11:

Banks should allow conversion of term deposits, daily deposits, or recurring deposits to enable depositors to immediately reinvest the amount lying in the aforesaid deposits with the same bank in another term deposit. Banks are required to pay interest in respect of such term deposits without reducing the interest by way of penalty, provided that the deposit remains with the bank after reinvestment for a period longer than the remaining period of the original contract.

A precise explanation here.

Awareness Fridays is my initiative to spread awareness on topics relevant to personal finance — every Friday. I urge you to take some time off and absorb this information — it’s pretty useful. And, as always, do spread the word if you find this useful.

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According to this circular issued by the Reserve Bank of India, we’ll now have three credit information companies:

  1. Credit Information Bureau (India) Ltd. or CIBIL
  2. Experian Credit Information Company of India Private Ltd.
  3. Equifax Credit Information Services Pvt. Ltd.

CIBIL is in operation since January, 2001; the other two are yet to commence the business of credit information in India.

That said, I still haven’t asked for my credit report. Have you?

Awareness Fridays is my initiative to spread awareness on topics relevant to personal finance — every Friday. I urge you to take some time off and absorb this information — it’s pretty useful. And, as always, do spread the word if you find this useful.

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If you have an existing loan of any sort from a bank or are planning to avail one, these guidelines on the soon to be introduced Base Rate system are a must read.

I particularly like this directive:

The Base Rate system would be applicable for all new loans and for those old loans that come up for renewal. Existing loans based on the BPLR (Benchmark Prime Lending Rate) system may run till their maturity. In case existing borrowers want to switch to the new system, before expiry of the existing contracts, an option may be given to them, on mutually agreed terms. Banks, however, should not charge any fee for such switch-over.

I have a car loan from a commercial bank — post July 01, 2010, need to see if this can be negotiated to better terms.

How about you?

Awareness Fridays is my initiative to spread awareness on topics relevant to personal finance — every Friday. I urge you to take some time off and absorb this information — it’s pretty useful. And, as always, do spread the word if you find this useful.

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Up to now, interest on savings account balances were calculated on the minimum balance in the account during the period from the 10th day to the last day of each calendar month. With this archaic method (introduced way back in 1987), you’d lose out on earning interest each time you withdrew money on or after the 10th of the month — any fresh deposits you made wouldn’t count too.

Starting April 01, 2010, the Reserve Bank of India is bringing about a significant change in the way the interest on the balance in your savings account is calculated. According to this circular:

Interest on balances in savings bank accounts would now be calculated on a daily product basis with effect from April 1, 2010.

What this means is that the interest will now be calculated on the balance in your savings account at the end of each day. This, in my opinion, is a fair way and you as a savings account holder stand to gain financially — in terms of the interest paid for your balances.

Another step in the right direction. The Indian financial system is slowly but surely maturing. What do you think?

Awareness Fridays is my initiative to spread awareness on topics relevant to personal finance — every Friday. I urge you to take some time off and absorb this information — it’s pretty useful. And, as always, do spread the word if you find this useful.

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Here’s a detailed tutorial from the Reserve Bank of India (RBI) on how to identify genuine rupee-denominated currency notes.

My observations:

  • It’s not possible for the common person to identify a counterfeit note on first glance. How often have you stopped to verify the genuineness of the currency in your hands?
  • Banks themselves have started using ultraviolet (UV) lamps to detect counterfeit notes. It’s interesting to see the teller closely examine each note you handover (when you deposit cash), but not do the same with the notes handed back to you (when you withdraw cash).
  • How good an idea is it to keep in each bank branch a public UV lamp that customers can use to identify the genuineness of their currency?

What do you think?

Awareness Fridays is my initiative to spread awareness on topics relevant to personal finance — every Friday. I urge you to take some time off and absorb this information — it’s pretty useful. And, as always, do spread the word if you find this useful.

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This is a guest post from Shilpa at Under the Rainbow. Though Shilpa claims that “she knows zilch about financial planning,” her posts always prove the opposite. In this post she explains why you really ought to be careful when you act as a reference for someone else’s financial dealings.

I learned this lesson the hard way. A colleague of mine wanted a personal loan and asked me if he could use my name and number as a reference. Having known him for a long time, I agreed. A few months later he quit the company, quit the city, and changed his mobile number. We lost contact.

And then started a slew of calls from the bank wanting to know his whereabouts. Since I had no idea, I said so but the calls didn’t stop. Even now, after more than two years, I get these calls when I am in the middle of a meeting, driving, or trying to put my baby to sleep. Each time a different person calls and I have to explain the situation all over again.

No amount of mails, scraps, and pokes have yielded any response from this colleague. I do not want to change my mobile number because of someone else’s wrong doing. Sigh! I guess I’ll just have to answer these calls until the bank marks this colleague as a defaulter and forgets him.

In this day and age, you really need to be careful about who you act as a reference for.

Awareness Fridays is my initiative to spread awareness on topics relevant to personal finance — every Friday. I urge you to take some time off and absorb this information — it’s pretty useful. And, as always, do spread the word if you find this useful.

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Have you ever pondered over questions such as “What’s the interest rate payable on my Savings or Current Account balances?” or “What happens if I opt for a premature withdrawal of my Fixed/Term Deposits?” or “What happens to an account that I no longer operate?” etc., then this Master Circular on Interest Rates on Rupee Deposits published by the Reserve Bank of India is a must read for you. Spend some time with this material and increase your knowledge on how the most commonly used financial instruments work.

Awareness Fridays is my initiative to spread awareness on topics relevant to personal finance — every Friday. I urge you to take some time off and absorb this information — it’s pretty useful. And, as always, do spread the word if you find this useful.

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The Master Circular on Maintenance of Deposit Accounts issued by the Reserve Bank of India — a must read for anyone who transacts with a bank.

Awareness Fridays is my initiative to spread awareness on topics relevant to personal finance — every Friday. I urge you to take some time off and absorb this information — it’s pretty useful. And, as always, do spread the word if you find this useful.

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Awareness Fridays: An Introduction to Gratuity

by Vinaya HS on July 17, 2009

in Finance

This is a guest post from Shilpa at Under the Rainbow. Though Shilpa claims that “she knows zilch about financial planning,” her guest posts never fail to prove the opposite.

Gratuity is a favor or gift, usually in the form of money, given by an employer to an employee in return for the employee’s loyal service. It is an employer’s way of thanking an employee for his loyalty. As per the Payment of Gratuity Act 1972, a company with ten or more employees should pay fifteen days’ salary (i.e. Basic + Dearness Allowance) to the employee on completion of a minimum of five years of uninterrupted service at the time of separation (by the way of resignation or retirement or death).

Gratuity up to Rs 350,000 is exempt from income tax. For a government employee, any amount is tax free. In case of death of the employee, the entire Gratuity is paid to the nominee without any tax deductions. An employer can also voluntarily choose to pay more Gratuity, but that amount would be taxable.

Here’s a simple example:

Mohan has resigned from ABC Pharmaceuticals after twenty years of continuous service. At that time, his Basic salary was Rs 22,000. His average number of work days per month was 22. The Gratuity payable would therefore be (Rs 22,000 / 22 days) * 15 days per year of service * 20 years of service = Rs 300,000.

I’d love to hear from your readers if they’re aware of any real examples — say if a family member or friend has received Gratuity.

Awareness Fridays is my initiative to spread awareness on topics relevant to personal finance — every Friday. I urge you to take some time off and absorb this information — it’s pretty useful. And, as always, do spread the word if you find this useful.

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I’d raised a few questions when I last wrote about accessing your credit scores in India. A couple of days later, the Economic Times published an interview featuring Credit Information Bureau (India) Limited (CIBIL) addressing these very concerns. It’s a must read, especially if you’ve previously availed credit or are planning to.

Awareness Fridays is my initiative to spread awareness on topics relevant to personal finance — every Friday. I urge you to take some time off and absorb this information — it’s pretty useful. And, as always, do spread the word if you find this useful.

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I’ve previously written about the Credit Information Bureau (India) Limited (CIBIL). To repeat,

CIBIL or Credit Information Bureau (India) Limited is India’s first credit information bureau and is a repository of information, which contains the credit history of commercial and consumer borrowers. CIBIL provides this information to its Members (i.e. banks and other financial institutions) in the form of credit information reports.

But what about you? Can you access your own credit report? According to this recent circular issued by the Reserve Bank of India,

  • Any person, who applies for grant or sanction of credit facility, from any credit institution, may request such institution to furnish him a copy of the credit information obtained by such institution from the credit information company.

  • Every credit institution shall on receipt of such requests, furnish to such person a copy of the credit information subject to payment of charges.

  • A maximum fees of Rs 50 can be charged for this purpose.

It’s certainly a step in the right direction — and good for you if you’ve been thinking of availing credit, but what about those who’re not inclined to avail credit right away. How then does one access one’s credit information report? What about those who’ve already availed credit facility? Surely, they’d like to know their credit scores too. And what exactly does credit facility include? Is credit cards, loans (any type), and overdrafts an exhaustive list?

Raises more questions than it answers. What do you think?

Awareness Fridays is my initiative to spread awareness on topics relevant to personal finance — every Friday. I urge you to take some time off and absorb this information — it’s pretty useful. And, as always, do spread the word if you find this useful.

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Over the years, I have observed that a significantly high number of employed people (colleagues, friends, and acquaintances) have very little to no understanding of how their monthly salary is computed. Therefore, they have no idea if what they’re receiving each month as salary is correct or not. More often than not, they’re simply happy that they’re receiving a certain amount each month.

I’ve often popped a question or two and have always been responded to with dazed looks. In my opinion, it’s your obligation to intimately study your salary slip and income tax computation each month (most employers do provide these figures each month; if they don’t, it’s your duty to ask for one). Spend some time and work through the numbers — and if something doesn’t seem right or if you simply don’t understand something, just ask. A great side effect: you will become intimately familiar with personal finance terminology.

What are you waiting for? Open up your latest salary slip and income tax computation and work through the numbers. You might just figure out that you ought to be paid more each month.

Awareness Fridays is my initiative to spread awareness on topics relevant to personal finance — every Friday. I urge you to take some time off and absorb this information — it’s pretty useful. And, as always, do spread the word if you find this useful.

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Key excerpts from a recent circular issued by the Reserve Bank of India.

The problem.

It has been brought to our notice that some banks do not have the system of acknowledging the receipt of the duly completed form of nomination, cancellation and/or variation of the nomination. Further, it is also understood that in some banks, although there is a system of acknowledgment of nomination as provided in the Savings Bank account opening form, such acknowledgments are actually not given to the customers.

The mandate.

1. In this connection, banks are aware that in terms of Rules 2 (9), 3 (8) and 4 (9) of the Banking Companies Nomination (Rules), 1985, they are required to acknowledge in writing to the depositor(s)/locker hirer(s) the filing of the relevant duly completed form of nomination, cancellation and/or variation of the nomination.

2. Banks are therefore advised to strictly comply with the provisions of Banking Regulation Act, 1949 and Banking Companies (Nomination) Rules, 1985 and devise a proper system of acknowledging the receipt of the duly completed form of nomination, cancellation and/or variation of the nomination. Such acknowledgment should be given to all the customers irrespective of whether the same is demanded by the customers.

3. A suggestion has been received that banks should indicate the name of the nominee in Pass Books/Fixed Deposit Receipts (FDRs). Since this would be helpful to the customers/nominees, banks are advised that in addition to the legend “Nomination Registered”, they should also indicate the name of the nominee in the Pass Books/Statement of Accounts/FDRs, in case the customer is agreeable to the same.

Call for action:

  • If you haven’t already availed of the nomination facility for your accounts and other deposits, today is probably the best time to get started on this task.
  • If you have already availed the nomination facility, check whether your accounts and deposits have recorded the details. If not, get it done immediately.

Awareness Fridays is my initiative to spread awareness on topics relevant to personal finance — every Friday. I urge you to take some time off and absorb this information — it’s pretty useful. And, as always, do spread the word if you find this useful.

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The Income Tax Department of India has on it’s website provided free income tax information booklets. These booklets cover a wide variety of topics on personal income tax and provide a wealth of information on how you should compute your income tax. Read through these booklets and you might find those elusive answers to your questions on income tax.

Click here to browse the income tax information booklets catalog.

Awareness Fridays is my initiative to spread awareness on topics relevant to personal finance — every Friday. I urge you to take some time off and absorb this information — it’s pretty useful. And, as always, do spread the word if you find this useful.

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Awareness Fridays: Have You Heard of CIBIL?

by Vinaya HS on February 27, 2009

in Finance

Have you ever been rejected for a loan or some other form of credit (such as a credit card) and then wondered why your case was rejected? Though a financial institution must now tell you why your application was rejected, there is a lot more that goes on behind the scenes.

Enter CIBIL.

CIBIL or Credit Information Bureau (India) Limited is India’s first credit information bureau and is a repository of information, which contains the credit history of commercial and consumer borrowers. CIBIL provides this information to its Members (i.e. banks and other financial institutions) in the form of credit information reports.

I’ll let the Frequently Asked Questions explain the rest.

Awareness Fridays is my initiative to spread awareness on topics relevant to personal finance — every Friday. I urge you to take some time off and absorb this information — it’s pretty useful. And, as always, do spread the word if you find this useful.

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The other day I was trying to withdraw money from a Citibank ATM using an ICICI Bank debit card. The Citibank ATM purred along merrily but finally coughed up a “Dispenser Failure” receipt. My stars must have been aligned because ICICI Bank quickly reversed the transaction and I could withdraw the money from a different machine. One might not always be so fortunate and one might end up playing merry-go-round with the bank trying to recover one’s money.

Thankfully, the Reserve Bank of India has recently mandated a time limit for resolving such disputes. In their circular on this topic, the Reserve Bank of India says:

The use of Automated Teller Machines (ATMs) for cash withdrawal has been increasing in the country. However, of late, we have been receiving a number of complaints from bank customers, regarding debit of accounts even though the ATMs have not disbursed cash for various reasons. More importantly, banks take considerable time in reimbursing the amounts involved in such failed transactions to card holders. In many cases, the time taken is as much as 50 days.

After examining the procedures involved in verification and resolution of such complaints, the Reserve Bank has concluded that delay of the magnitude indicated above is not justified, as it results in customers being out of funds for a long time for no fault of theirs. Moreover, this delay can discourage customers from using ATMs. Therefore, it has been decided that, to start with, banks shall reimburse to the customers the amount wrongfully debited within a maximum period of 12 days from the date of receipt of customer complaints.

The next time such an incident happens to you, you now know how to talk to your bank. By the way, you do safely keep a copy of such receipts right?

Awareness Fridays is my initiative to spread awareness on topics relevant to personal finance — every Friday. I urge you to take some time off and absorb this information — it’s pretty useful. And, as always, do spread the word if you find this useful.

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Because, Indian banks are now free to charge an annual interest rate of up to 49% from credit card customers for late payment.

Read the complete story here.

It’s not a great idea to carry your credit-limit-beyond-what-I-can-pay (most often …) credit card in your wallet especially in these lean times. You might be the most punctual person in paying off your credit card balances each month, but all it takes is one delayed payment to push you into the drowning spiral of debt. Leave your credit card at home, spend cash, and fully enjoy your life.

49%!

WTF mate?

What do you think?

Awareness Fridays is my initiative to spread awareness on topics relevant to personal finance — every Friday. I urge you to take some time off and absorb this information — it’s pretty useful. And, as always, do spread the word if you find this useful.

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Awareness Fridays: Cheque Clearance Timeframes

by Vinaya HS on January 30, 2009

in Finance

You might have often wondered what has happened to that cheque you recently deposited. And if you enquired, your bank would have given you a whole bunch of doesn’t-make-sense-to-me reasons. Thankfully, the Reserve Bank of India recently passed a notification on cheque clearance timeframes to be adhered to by Indian Banks.

I particularly like this guideline:

For local cheques, credit and debit shall be given on the same day or at the most, on the next day.

It will be some time before our banks actually adhere to these guidelines, but nonetheless it’s a step in the right direction.

Awareness Fridays is my initiative to spread awareness on topics relevant to personal finance — every Friday. I urge you to take some time off and absorb this information — it’s pretty useful. And, as always, do spread the word if you find this useful.

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Assume that you’re looking out for a car loan and some bank offers you the following options:

  1. Rs 200,000 for 36 months at 9% fixed plus a processing fee of Rs 150, or
  2. Rs 200,000 for 36 months at 12.75% reducing balance.

Which of these two loan offers would you choose?

If you chose either of the options, without asking further questions, you’re wrong. The first one looks cheaper prima facie and is psychologically very appealing. The second one doesn’t say whether the interest rate is fixed or floating through the tenure. Both of them don’t say whether the EMI’s are in advance or arrears. This is where your level of financial awareness comes into picture. A loan that looks and sounds cheap most certainly isn’t so. I am aware of a recent incident where an expensive car loan masquerading as a cheap loan was pushed to a relative of a friend.

You should ask questions. Lots of them. There are no dumb questions in personal finance. It’s your money after all. And, your very first question to the bank should be to ask them for a complete loan amortization schedule for any option they quote so that you can compare firsthand the total interest component that you would be paying.

Awareness Fridays is my initiative to spread awareness on topics relevant to personal finance — every Friday. I urge you to take some time off and absorb this information — it’s pretty useful. And, as always, do spread the word if you find this useful.

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