DEPOSIT AND MISCELLANEOUS SERVICES

Since the last several years there has been a sea change in the services of the Bank. The technological revolution in the Banking industry has ushered in innovative Banking culminating in a host of services available to the public. With the advent of computerisation in Banks the services have become quicker and convenient to the customer. A customer can bank from anywhere at anytime. The facility of online transfer of funds, account information and remittances from abroad have become fast and convenient. With the core banking facilities, Branches of Banks are interconnected for all Banking transactions. In some Banks cheques drawn on one Branch is payable at par at all the branches which are connected. On line facility can also be used for payment of utility bills and taxes. The Banks have introduced online trading in shares and Online booking for Railway / Indian Airlines. ATM (All Time Money) net worth provides round the clock service. The ATM facility provides the customer to withdraw cash from his account through vending machine provided in the ATM centre. The customer is saved of the botheration of going to the Bank and waiting for his payment. Further this facility can be availed on all holidays.
Banks have tied up with Life Insurance Corp of India and General Insurance company for making available their entire Insurance product range. They also offer Mutual Fund product of LIC, Reliance, DSP and other reputed companies. To facilitate their NRI clients and investors they have marketed their Depository services by opening their specialised branch in association with National securities depositors Ltd. Banks not only assist corporate in their business but also help the common man realise his dream. It has made its presence felt in rural India besides reaching out across the globe.
Safety of your hard earned money is the prime concern of the Banks. To this end Banks have various deposit schemes like Term Deposits, Savings Banking, Current Account etc. The nomenclature of deposits classified under Term Deposits vary from Bank to Bank. The deposits classified under Term deposits are Fixed Deposit, quarterly Income Certificate, Monthly Income Certificate, Kamadhenu Deposits . Double Benefit Deposits etc. Term Deposit is a fixed amount deposited by a customer for a fixed period and is payable on maturity of deposit. The interest payable on the term deposit varies from monthly, quarterly, annually and on due date of the deposit. In the case of interest payable on maturity of deposit the depositor gets the benefit of compounded interest The eligibility criteria for. Term Deposits are as follows.
A Term Deposit can be opened by an Individual in his / her name or jointly with his / her spouse or with anybody. The maximum number of persons in a joint account will be four and the deposit is repayable to all of them jointly or to anyone or more of them or survivors or the first named depositor or survivors. In the case of a minor only the guardian can operate the account until the minor is 12 years of age. Thereafter the minor can operate his / her account if the Bank opines that the minor understands the operation of the account. Deposit accounts can also be opened in the name of Hindu undivided family, Trusts, Company clubs, Association, Institutions parternership firm and societies. The deposit account will be opened in the Banks standard form and submitted to the Bank duly completed in all respects. The account should be introduced by an account holder having a satisfactorily conducted account for a minimum period of one year. Two recent passport size photograph of the depositor should be submitted along with the account opening form. The depositor should also submit his Permanent Account Number (PAN) or general Index number (GIR) In the alternate a declaration in form number 60 or 61 as per IT Act (Sec 139 A) will suffice. The following documents have to be submitted as identity and address proof.
a) Passport
b) PAN card
c) Driving License
d) Employee identity card with address
e) Telephone / Electricity bills
f) Consumer gas connection book
The minimum deposit amount should be Rs.1000/- for the original deposit made by the depositor. This criteria however varies from Bank to Bank. The rate of interest is determined on the amount of the deposit and the prevailing rate at the time of opening the deposit account / renewal of the deposit. As the Bank accepts the deposit on a contract basis any change in interest rate in the interviewing period will not be applicable to the deposit. In terms of IT Act Tax (TDS) will be deducted at source if the interest paid on the deposit is more than Rs.10,000/- per annum. In case the depositor does not want the tax to be deducted he has to submit Form 14H/E as per I.T. Act. The maximum period of deposit will be 10 years.
The Term deposit receipt will depict the name of the depositor, ID number, the name of the Branch of the Bank, amount and date of deposit, due date, the rate of interest and the interest amount. The receipt will be signed by an authorised official of the Bank with his code number. Repayment instruction will also be indicated in the Deposit Receipt. Overdue interest may be paid by the Bank if the deposit is renewed from the date of maturity. The interest for renewed deposit will be the rate applicable to the renewed period as prevailing on maturity date or date of renewal whichever is minimum. Repayment of matured deposit will be by credit to the depositors savings / current account or by cash. The maximum amount of cash payable is less than Rs.20,000/- as per IT Act 1961. The depositor can avail loan against his term deposit. In such an event the depositor surrenders his deposit receipt to the Bank. The Bank will have a lien on the deposit until the loan is repaid. The maximum amount of loan against the term deposit is 75% of the deposit amount though the Banks have discretion to grant loan upto 90% of the deposit. The interest payable on the loan will be 2% above the deposit rate. The depositor can also avail loan against his deposit from any branch of the Bank. Transfer of deposit is permissible from branch to branch of the Bank in different places. Banks also provide transfer of funds from the customers account to the beneficiaries account with branches of other Banks. The remitted amount gets credited to the beneficiaries account within a maximum of 2 hours from the time the message gets transmitted from the customers bank. Nomination facility is available for all types of deposit Nomination can be effected by the depositor at the time of opening the account or on any subsequent day. It may be noted that if the beneficiary of the depositor's 'WILL' is different from the nominee of his deposit bequeath of deposit made to the beneficiary of the 'WILL' will prevail over the nominee. Some Banks have Auto Renewal Deposit. In this scheme the period of deposit varies from 15 days to 45 days. The deposit is automatically renewed for 12 times. The deposit earns simple interest. The period of Automatic renewal of deposit varies from Bank to Bank.
Recurring Deposit can be opened for a minimum period of 6 months and maximum period of 120 months with a minimum amount of Rs.100/- per month. In a Recurring Deposit account a fixed amount is deposited every month for over a period of time. Interest is compounded quarterly. There is also Tax savings term deposit which is a replica of Recurring deposit. However there is a lock in period of 5 years which means the depositor cannot withdraw his deposits until the completion of the deposit period. Tax will be deducted at source on the amount of interest paid as per I.T. Act from time to time and the deposit is eligible for tax benefits under Section 80 (C) of IT Act. In the case of Recurring deposit loan may be availed against the deposit but in the case of Tax Savings Term Deposit no loan will be granted by the Bank. Banks have special Recurring deposit scheme for Corporate, Government Undertakings and Institutions. The minimum amount to be deposited in the account every month is Rs.10,000/- and the minimum period of deposit is 5 years. The maximum period of deposit is 20 years.
The other types of deposits are Savings Bank, Current Account etc. Besides the regular Savings Bank Account Banks also have "No frills Savings Bank Account" with zero balance facility. It can be opened by an individual including minors above 10 years of age. The account can be opened without any initial deposit. The account is meant for Pensioners, labourers, employees of unorganised sector, students and self employed persons. The rate of interest is the same as applicable to normal Savings account.
Facilities offered for the account are
a) Cheque Book Facility
b) Maximum 10 withdrawals per year.
c) Collection of outstation cheques.
d) Remittance facility.
e) Nomination facility
Photographs, identity proof and age proof is required. The depositor has to declare that the balance in the account with not exceed Rs.50,000/- and the total credit in all the accounts will not exceed Rs.1 lac in a year.
The term deposit maintained with a bank for 5 years is eligible for income Tax exemption for that financial year only. The maximum amount of deposit is Rs. 1 lac. The depositor cannot avail loan against the deposit. Before availing this facility the depositor should specifically inform the bank that the deposit is made to avail tax exemption.

REVERSE MORTGAGE

Parents spend their prime youth on their children by sacrificing their personal effects, just to see them in clover. With the advent of nuclear family, children settle in distant places to further their prospects leaving their parents to fend for themselves. Some of them land up in old age homes after selling their house as their income from retirement benefits does not cover the cost of living and they find it difficult to meet both ends. To ameliorate their problems the government has decided to bring into effect the scheme of Reverse mortgage which is prevalent in US, Canada and U.K. Though reverse mortgage is a new concept in India its introduction will supplement the pension and other incomes of retired people so as to ensure a reasonable standard of living.
Reverse Mortgage is the opposite of a normal mortgage. In a normal mortgage the borrower is granted loan for construction / purchase of a residential or commercial building free of encumbrances and the said building is mortgaged to the Bank as security for the loan availed by the borrower. In the case of a reverse mortgage the owned residential property of the borrower which is free from all encumbrances is mortgaged to the Bank as security for the loan granted to the borrower.
The loan granted will be based on the value of property.
The salient features of reverse mortgage is as follows :
The borrower must have completed 60 years of age and must have retired from service.
The mortgage pertains to only residential property owned by the borrower.
The residential property should be self acquired and not ancestral.
The prospective borrower should live in the house offered for mortgage and it should be his / her permanent primary residence.
Regarding the mode of disbursal of the mortgage loan, the borrower has the choice of any of the following options.
a) Lump sum loan
b) Fixed monthly installment
c) Line of Credit
d) Combination of all the options
The residential property should be free from all encumbrances and it must be an approved construction.
Dewan Housing Finance Corporation Lt. (DHFL) is the first finance company in India to introduce reverse mortgage scheme for senior citizens. The scheme is so designed to benefit the senior citizens after their retirement from service. The scheme supplements their pension and other income.
Based on the estimated value of the residential property DHFL will grant loan to the borrower at 12% interest. The loan to value ratio will be 50%. The disbursal of the loan will be in fixed monthly installment for a period of 15 years. In other words the tenure of the loan will be 15 years. However if the borrower out lives the tenure of the loan, the mortgage can be renewed six months before the end of the tenure. The mode of construction and the life of the property will be the basis for valuation of the property.
The finance company permits the borrower and his spouse to live in the house as long as they are alive irrespective of the expiry of the tenure period of 15 years. The loan need not be repaid by the borrower during his life time. However after the expiry of 15 years the payment of fixed monthly installment to the borrower will be stopped. If one of the applicants expires the DHFL would sell the house and the sale proceeds will be appropriated towards the outstanding loan and interest. The surplus amount will be paid to the legal heirs of the borrower. The legal heirs have the option to repossess the property after the demise of the borrower, by repaying the loan and interest. The scheme is presently introduced in Bombay and expected to be launched in other cities as well.
Punjab National Bank is the first nationalised Bank to launch reverse mortgage scheme. The reverse mortgage facility is offered to senior citizens.
As per the scheme the borrower is entitled for a maximum loan of Rupees One Crore against his property mortgaged to the Bank. The tenure of the loan is 20 years and carries an interest of 10% per annum. All other conditions of a reverse mortgage are applicable to the loan. Since the reverse mortgage is still in its infancy there appears to be some ambiguity in its operation. At the insistence of the government the National Housing Board (N.H.B.) which is the apex body has drafted guidelines to be followed by all Banks and housing finance companies in respect of reverse mortgage scheme. The guidelines as follows ensures uniformity in the procedures for disbursal of the loan.
The fixed monthly installment payable to the borrower will be subject to upward revision on revaluation of the mortgaged property by the Banks and finance companies once in every five years. This is to ensure that the borrower gets the benefit of appreciated value of his property.
The loans will be given to borrowers who have a clear and marketable title to their property. The rule applies not only to houses but also to flats. If the property offered to the Bank / finance company as security for reverse mortgage is inherited property then all the claimants will give their consent in writing and same will be subject to legal scrutiny so as to ensure that the title to the property is clear and marketable. The borrower should be staying in the house proposed to be mortgaged. Mortgage of house by Power of Attorney holder is not acceptable. The quantum of loan to be disbursed to senior citizens depends on the age of the borrower. Senior citizens between 60 and 70 years of age are eligible for loan upto 45% of the value of the property. It is enhanced to 50% for 71-75 age group and 55% for 76-80 group.
The loan is not required to be repaid by the borrower. The Bank / HFC will recover the loan with interest on the demise of the borrower (owner of property) or on expiry of the mortgaged period by selling the property. The surplus amount will be given to the owner or his legal heirs. The owner has the option to repay the loan before expiry of the loan period. The tenure of the loan will be 15 years. In this scheme spouses will be the joint borrowers. In the event of the demise of borrower the spouse can continue to live in the house and get monthly payment until his / her death. In the event of the borrower surviving beyond the tenure period of 15 years, the Bank / HFC will stop payment of the monthly installment to the borrower and the maintenance of the house would be borrower's responsibility. On the death of the surviving borrower the mortgaged property will be sold by the Bank / finance institution and the outstanding loan amount with interest will be recovered from the sale proceeds. The surplus amount will be paid to the legal heirs. However the legal heirs can reposses the property after settling the Bank's / HFC's dues. The borrower has also the option to repay the loan before the expiry of the mortgaged period. The legal heirs who have been staying in the mortgaged properly will have to vacate within a reasonable period after the demise of the surviving borrower so as to facilitate the sale of the property by the mortgagee.
Corporation Bank has launched the reverse mortgage scheme on 14th April 2008. It is known as "Corp Shelter" for the benefit of senior citizens.
The scheme envisages the following conditions besides other conditions applicable to the scheme.
Married couples will be eligible as joint borrowers provided one of them has completed 60 years of age and the other has completed 55 years of age.
The loan amount will range between Rs.1 lakh and Rs.50 lakhs. The amount can be used for any purpose but the borrower must pay off any existing mortgages with proceeds from reverse mortgage.
The borrower shall not use the proceeds of reverse mortgage loan for speculative trading purposes.
The rate of interest on the loan will be 10% p.a.. The borrower has the option to choose either the fixed rate, rate of interest or floating rate of interest.