PPF, other small savings to fetch lower interest rate from January 1,2018

The government on Wednesday slashed interest rates on small savings schemes, including NSC and PPF, by 0.2 percentage point for the January-March period from the rates applicable in the previous quarter, a move that will prompt banks to lower deposit rates.

At the same time, investments in the five-year Senior Citizens Savings Scheme has been retained at 8.3 per cent. The interest rate on the senior citizens' scheme is paid quarterly. A finance ministry notification said rates have been reduced across the board for schemes such as National Savings Certificate (NSC), Sukanya Samriddhi Account, Kisan Vikas Patra (KVP) and Public Provident Fund (PPF). However, interest on savings deposits has been retained at 4 per cent annually.

Since April last year, interest rates on all small savings schemes have been recalibrated on a quarterly basis. As per the notification, PPF and NSC will fetch a lower annual rate of 7.6 per cent while KVP will yield 7.3 per cent and mature in 11 months.

The girl child savings scheme Sukanya Samriddhi Account will offer 8.1 per cent from existing 8.3 per cent annually. Term deposits of 1-5 years will fetch a lower interest rate of 6.6-7.4 per cent, to be paid quarterly, while the five-year recurring deposit is pegged at 6.9 per cent. "On the basis of the decision of the government, interest rates for small savings schemes are to be notified on a quarterly basis," the ministry said, while notifying the rates for the fourth quarter of the financial year 2017-18.

While announcing the quarterly setting of interest rates, the ministry had said that rates of small savings schemes would be linked to government bond yields. The move is expected to see banks lowering their deposit rates in line with the small savings rate offered by the government.

On Wednesday, the government also said that it will borrow an additional Rs 50,000 crore from the market in the current fiscal year, triggering fears that the move may lead to a widening of the deficit target.

Source : TOI

Got money stolen from your ATM/card? Here's how much your bank is liable

Bank thefts are getting sophisticated by the day. Let alone retrieving your money, you can't even get to know how it was stolen in many cases. Two weeks ago, several people complained about having lost money from their accounts after using an ATM in Kalkaji in Delhi. But the police has yet to find out how the money was stolen as no prevalent ways such as a cloning device were used. Some customers even lost lakhs of rupees after using that ATM. Police suspect a gang might have hacked the machine's computer system.

With new security threats emerging every day, customers must know how much liability the bank shares in cases of unauthorized transactions. In July, the Reserve Bank of India (RBI) had revised its norms to limit the liabilities of consumers for unauthorized electronic transactions in their bank accounts, establishing a safety net for the citizens amid the national drive toward digital transactions and rising incidents of fraud. Read below to know how much the bank and the customers are liable in cases of unauthorized transactions.

Zero liability 

A customer will be entitled to zero liability where the unauthorised transaction occurs in the following events—contributory fraud/ negligence/ deficiency on the part of the bank (irrespective of whether or not the transaction is reported by the customer); third-party breach where the deficiency lies neither with the bank nor with the customer but lies elsewhere in the system, and the customer notifies the bank within three working days of receiving the communication from the bank regarding the unauthorised transaction 

Limited liability 

A customer will have limited liability for the loss occurring due to unauthorized transactions in the following two cases: 

1. In cases where the loss is due to negligence by a customer, such as where he has shared the payment credentials, the customer will bear the entire loss until he reports the unauthorized transaction to the bank. Any loss occurring after the reporting of the unauthorized transaction shall be borne by the bank. 

2. In cases where the responsibility for the unauthorised electronic banking transaction lies neither with the bank nor with the customer, but lies elsewhere in the system and when there is a delay (of four to seven working days after receiving the communication from the bank) on the part of the customer in notifying the bank of such a transaction, the per transaction liability of the customer shall be limited to the transaction value or the amount mentioned on the website of RBI,, whichever is lower.

Further, if the delay in reporting is beyond seven working days, the customer liability shall be determined as per the bank's Board approved the policy. Banks shall provide the details of their policy in regard to customers' liability formulated in pursuance of these directions at the time of opening the accounts. Banks shall also display their approved policy in public domain for wider dissemination. The existing customers must also be individually informed about the bank's policy. 

Source: Economic Times

5 housing finance companies dominate mkt, lend 78% of home loans: ICRA

HDFC, LIC own assets worth over Rs 1 lakh cr, cornering around 57%.

The housing finance market in India is fragmented, with 80-plus players. However, two large companies, HDFC and LIC, each has assets over Rs 1 lakh crore, cornering 57 percent, according to rating agency Icra. The next batch, of three HFCs — DHFL, Indiabulls, and PNB HFL — with a book size of Rs 15,000-50,000 crore each — have a combined market share of 21 percent.

Sector executives said though these five have a dominant share, the thrust on affordable housing finance will gradually change the scenario. A little more than 25 HFCs have been set up since 2015.
The growth also comes with some risk, such as more laxity in underwriting standards in the midst of effort to expand books. The seasoning of affordable loans will throw up the challenge of slippages. Also, credit to developers (also known as developer loans) could be in default on account of consolidation and churn in real estate, due to regulatory reforms, they said.

Further down the ladder, eight players with an asset base of Rs 5,000-15,000 crore have a combined 12 percent share in the market. The prominent ones here include Gruh, HDFC’s subsidiary, Tata Capital Housing, Canfin Homes, India Infoline and ICICI Home. Rating agency data show those having a loan book below Rs 5,000 crore hold a small share of 10 percent in all. The reported capital adequacy of HFCs remains comfortable, given the relatively lower risk weight for home loans.

By Icra’s estimate, HFCs will require Rs 9,000-16,000 crore of external capital (11-19 percent of existing net worth) to grow at a compounded annual rate of 20-22 percent for the next three years. The internal capital generation level (after dividend) would be 15-16 percent and the gearing level is eight to nine times. Most of this incremental capital requirement would be for the small HFCs, including those operating in affordable housing. HFCs compete with commercial banks in home loans and their market share has grown gradually. With the spawning of new companies, especially for affordable housing, their share in an expanding pie is expected to grow at a faster pace. HFCs' share in total housing loans was 33 percent in March 2012 and 37 percent in March 2017. Commercial banks’ share went from 67 percent to 63 percent.

What is Gratuity?

Gratuity is one of the least understood components of salary. InvestmentYogi explains everything about Gratuity and the tax implications for you.

                

Gratuity is a part of salary that is received by an employee from his/her employer in gratitude for the services offered by the employee in the company. Gratuity is a defined benefit plan and is one of the many retirement benefits offered by the employer to the employee upon leaving his job. An employee may leave his job for various reasons, such as - retirement/superannuation, for a better job elsewhere, on being retrenched or by way of voluntary retirement.

Eligibility

As per Sec 10 (10) of Income Tax Act, gratuity is paid when an employee completes 5 or more years of full time service with the employer(minimum 240 days a year).

How does it work?

An employer may offer gratuity out of his own funds or may approach a life insurer in order to purchase a group gratuity plan. In case the employer chooses a life insurer, he has to pay annual contributions as decided by the insurer. The employee is also free to make contributions to his gratuity fund. The gratuity will be paid by the insurer based upon the terms of the group gratuity scheme.

Tax treatment of gratuity

The gratuity so received by the employee is taxable under the head ‘Income from salary’. In case gratuity is received by the nominee/legal heirs of the employee, the same is taxable in their hands under the head ‘Income from other sources’. This tax treatment varies for different categories of individual assessees. We shall discuss the tax treatment of gratuity for each assessee in detail.

For the purpose of calculation of exempt gratuity, employees may be divided into 3 categories –

• Government employees and
• Non-government employees covered under the Payment of Gratuity Act, 1972
• Non-government employees not covered under the Payment of Gratuity Act, 1972

In case of government employees – they are fully exempt from receipt of gratuity.

In case of non-government employees covered under the Payment of Gratuity Act, 1972 – Maximum exemption from tax is least of the 3 below:

1. Actual gratuity received;
2. Rs 10,00,000;
3. 15 days’ salary for each completed year of service or part thereof

Note:

• Here, salary = basic + DA + commission (if it’s a fixed % of sales turnover).
• ‘Completed year of service or part thereof’ means: full time service of > 6 months is considered as 1 completed year of service; < 6 months is ignored.
• Here, number of days in a month is considered as 26. Therefore, 15 days’ salary is arrived as = salary * 15/26
• In case of non-government employees not covered under the Payment of Gratuity Act, 1972 – Maximum exemption from tax is least of the 3 below:

1. Actual gratuity received;
2. Rs 10,00,000;
3. Half-month’s average salary for each completed year of service (no part thereof)

Note:

• Here, salary = basic + DA + commission (if it’s a fixed % of sales turnover).
• Completed year of service (no part thereof) means: full time service of > 1 year is considered as 1 completed year of service. < 1 year is ignored.
• Average salary =10 months’ salary (immediately preceding the month of leaving the job)/10

Illustration

Let’s understand the above math clearly with an example:

Varun had been working with an IT company since past 10 years, 7 months. He is retiring on 15th April, 2010. His current Basic = Rs 40,000 pm, DA = Rs 5,000 pm. He is going to receive a gratuity amount of Rs 3 lakhs on retirement. Note: Varun’s basic and DA have been the same since past 1 year.

Lets consider 2 situations here – (a) Varun’s employer is covered under Payment of Gratuity Act, 1972; and (b) Varun’s employer is not covered under Payment of Gratuity Act, 1972.

•    Salary = Basic + DA = Rs 40,000 pm + Rs 5,000 pm = Rs 45,000 pm

•    Average salary = 10 months’ salary (immediately preceding the month of leaving the job)/10 = (Rs 45,000 pm * 10)/10 = Rs 45,000 pm. Therefore, half-month’s average salary is = Rs 45,000/2

Important points to remember

•    Generally, only government employers give DA to their employees. Above example is only for illustrative purpose.

•    The salary of the employee may differ over a period of time on account of change in basic, DA and/or other factors.

•    In case gratuity is received from more than one employer during the previous year, maximum exemption allowed is up to Rs 10,00,000.

•    Where employee has already claimed gratuity exemption in any previous year (s), the maximum exemption amount allowed for the current previous year i.e. Rs 10,00,000 will be reduced by the amount of deduction already claimed in the previous years.

•    In case of an employee who is employed in a seasonal establishment ( not employed throughout the year), the gratuity exemption shall be for seven days wages for each season.

Sources: business standered, investment yogi

How to withdraw PF and EPS money after leaving your job

After resigning from a job many individuals do not get their provident fund (PF) transferred from the previous employer to the new employer.People do this mainly because the funds are safe with the Employees' Provident Fund Organisation (EPFO) and it keeps earning tax-free returns.

Things, however, will not be the same from now on. In November 2017, the Bengaluru bench of the Income-Tax Appellate Tribunal (ITAT) ruled out tax-exemption on the interest earned after an employee has quit. So, to avoid getting taxed, you will have to either transfer the PF balance to the new employer or withdraw the amount at the earliest after the exit.

After an exit from a job, even though no fresh contributions are made, such PF accounts remain 'operative' with the balance earning interest every year. The PF balance as on the date of exit from an organisation continues to be tax-exempt but interest earned on the balance thereafter will be taxable in the year of withdrawal, i.e., it's only the amount of interest earned during the out-of-job period which comes into the tax net. So, to avoid tax, one should get the PF balance transferred to the new employer.

If such a case pertains to you, you have two options: continue earning taxable interest or withdraw the PF balance. Let's see how you can withdraw the PF balance.

When can an employee withdraw PF balance?

According to the EPF Act, to claim final PF settlement, one has to retire from service after attaining 58 years of age. The total PF balance includes the employee's contribution and that of the employer, along with the accrued interest. In addition, he will be eligible to get the Employees' Pension Scheme (EPS) amount as well depending on the years of service.

But what if someone decides to quit his job before reaching 58? Under the existing rule, employees who resign from a job before they turn 58 years of age can withdraw the full PF balance (and the EPS amount depending on the years of service), if he is out of employment for 60 straight days (two months) or more after leaving a job and then withdraw.

Along with the PF, one is also allowed to withdraw the EPS amount if the service period has been less than 10 years and not later on. Once this milestone is crossed, the employee compulsorily gets pension benefits after retirement.

To withdraw the PF balance and the EPS amount, the EPFO has launched a 'composite form' to take care of withdrawals, transfer, advances, and other related payments.

Before you start the withdrawal process make sure all your previous PF accounts are merged into one. The total service in the present establishment as well as previous organisations will be taken into account and therefore, it is advisable to merge your accounts.

The withdrawal process

The withdrawal process becomes simpler and less time-consuming if you have your Aadhaar number with you. Here is how you can initiate the withdrawal for both, with and without Aadhaar.

Withdrawing without using Aadhaar card number:

If you don't have an Aadhaar, but have the PF number, use this form - Composite Claim Form (Non-Aadhaar).

You will have to furnish Permanent Account Number (PAN) if the total service period is less than five years and also attach two copies of Form 15G/15H, if applicable. In case the Universal Account Number (UAN) is not available, you can mention only the PF account number.

Withdrawing using Aadhaar card number:

You can submit a Composite Claim Form (Aadhaar) directly to the concerned EPFO office without attestation of claim form by the employers. The payment of the PF balance will be sent to your bank account, so attach a cancelled cheque along with the form.

Before proceeding ensure these things:

You have submitted complete details in Form11 (New) to your employer, Aadhaar card number and bank account details are available on the UAN portal, and the UAN has been activated.

The withdrawal process will entail these conditions. See which one caters to you and choose the form accordingly.

1. Withdrawing PF balance plus EPS amount (for below 10 years of service)

2 . Withdrawing PF balance plus EPS amount (over 10 years of service)

3. Withdrawing PF balance only and reduced pension (age 50-58; over 10 years of service)

4. Withdrawing PF balance only and full pension (After 58)

1. Withdrawing PF balance plus EPS amount (for below ten years of service)

If service period has been less than 10 years, both PF balance and the EPS amount will be paid. To get EPS amount, in the Composite Claim Form (Aadhaar or Non-Aadhaar), along with choosing 'Final PF balance', also choose the 'pension withdrawal' option.

If you plan on re-joining the workforce, you may opt to get the 'scheme certificate' by furnishing Form 10C.

2. Withdrawing PF balance plus EPS amount (over ten years of service)

If you have already completed 10 years of service, the EPS amount cannot be withdrawn and only the scheme certificate is to be issued by filling Form 10C along with the Composite Claim Form (Aadhaar or Non-Aadhaar). Pension is to be paid from age 58 while a reduced pension can be paid from age 50. One may opt for early pension (reduced proportionately) after 50 years, provided one has completed 10 years of service.

3. Withdrawing PF balance and reduced pension (age 50-58) (over ten years of service)

You can only get pension after turning 50 years of age and have rendered at least 10 years of service. If your service period has been more than 10 years and you are between the age of 50 and 58, you may opt for reduced pension. For this, Form 10D has to be submitted along with the Composite Claim Form (Aadhaar or Non-Aadhaar).

4. Withdrawing PF balance and full pension (After 58)

After 58, you have to submit the same Form 10D to claim the full pension.

Souce: ET wealth

SBI Bank Account-Aadhaar Card-Linking: How To Do It Online, Through ATM, SMS

Aadhaar card can be linked to existing SBI accounts through any one of four channels provided by India's largest bank.

State Bank of India (SBI), the country's largest bank, offers multiple ways to its customers for linking their Aadhaar with bank accounts. Aadhaar can be linked to existing SBI accounts in one of four channels, according to SBI's website - sbi.co.in. These are branch visit, SMS, ATM and internet banking (via onlinesbi.com), according to SBI's website - sbi.co.in. The government is expanding the scope of Aadhaar linking. A deadline of December 31, 2017 has been set for linking your bank account with Aadhaar (UID).

Here's how you can link your existing SBI account with Aadhaar, according to the bank:

Linking Aadhaar (UID) with SBI bank account via internet banking portal onlinesbi.com

SBI customers having subscribed to the bank's internet banking facility can log into www.onlinesbi.com and access the link "Link your Aadhaar number" under "My Accounts", appearing on the left panel of the screen, according to SBI.

Clicking on the link directs the user to a screen where he or she has to select the Account number, input the Aadhaar number and click on 'Submit'.

The last two digits of registered mobile number (non-editable) will be displayed to the customer, according to SBI. The status of mapping will be advised to the customer's registered mobile number, it noted.

Linking Aadhaar (UID) with SBI bank account through SBI ATM

After swiping the ATM card and entering your PIN, Select the menu "Service - Registrations". Select Aadhaar Registration (or inquiry as per your need). Select the account type.

The user is then asked to enter his or her Aadhaar number.

Confirm the same by re-entering it, according to the bank's website.

Linking Aadhaar with SBI bank account through SMS

In case the mobile number is not registered or in case the Aadhaar is already linked to Account, an SMS reply will be sent to you, according to the SBI website.

If your mobile number is registered with SBI, the user will receive an SMS confirmation of the seeding request, it noted.

The Aadhaar number will be verified by Bank with UIDAI. In case it fails verification, an SMS will be sent to the customer to contact any SBI branch along with Aadhaar number or e-Aadhaar.

Source: ndtvprofit.com

RBI caps MDR to boost debit card transactions

In a bid to encourage electronic payments, the Reserve Bank of India (RBI) has decided to cap the Merchant Discount Rate (MDR) applicable on transactions conducted via debit cards from January 1, 2018.

The cap on MDR for debit card transactions has been based on two newly created categories — small merchants with turnover up to Rs 20 lakh and other merchants with turnover above Rs 20 lakh — RBI said on Wednesday.

According to the country’s central bank, cap on “POS” (Point of Sales) has been kept at Rs 1,000 per transaction or 0.90 per cent of the transaction value for “other merchants”, while that of Rs 200 or 0.40 per cent has been set for “small merchants”.

The MDR for QR code-based transaction has been capped at Rs 200 or 0.30 per cent for “small marchants” and Rs 1,000 or 0.80 per cent for “other merchants”.

“In recent times, debit card transactions at ‘POS’ have shown significant growth. With a view to giving further fillip to acceptance of debit card payments for purchase of goods and services across a wider network of merchants, it has been decided to rationalise the framework for MDR applicable on debit card transactions based on the category of merchants,” the RBI said in a statement post its fifth monetary policy review on Wednesday.

The country’s central bank added that the revised MDR aims at achieving the twin objectives of increased usage of debit cards and ensuring sustainability of the business for the entities involved.

How the new financial regulation law will affect the banking sector

The RBI’s regulatory role could be undermined. Deposits of customers could be used to bail-in banks reeling under corporate defaults.

Are the savings people slowly accumulate in their bank accounts safe? This question seems inherently counter intuitive. Banks are always associated with financial security. Anyone who deposits money in their bank accounts expects the financial institution to give them back their money when they want to withdraw it.

However, what if the financial situation of the bank deteriorates so much that it becomes unable to repay the deposits it holds? This situation of a sick bank was envisaged as far back as 1961, when the Indian Parliament passed the Deposit Insurance and Credit Guarantee Corporation Act.

Under that law, deposits of up to Rs 1 lakh, including interest, are protected by the insurance cover that the bank takes. This means that the payment of all deposits up to Rs 1 lakh are guaranteed even if the bank sinks. Anything over and above Rs 1 lakh does not have this protection, which means there is a theoretical possibility that a bank account holder with a large deposit might lose a lot of money if the bank goes down.

However, this has never happened since 1961. Figures from banking unions suggest that the 21 public sector banks, which corner 82% of the banking business in India, together pay about Rs 3,000 crores as insurance premium on deposits to the Deposit Insurance and Credit Guarantee Corporation, a subsidiary of the Reserve Bank of India. This framework, however, is all set to witness a significant shake up when Parliament takes up the Financial Resolution and Deposit Insurance Bill, 2017, for legislative approval, possibly in the upcoming Winter Session itself.

Banking unions have stridently opposed this bill for a variety of reasons. The unions said in a joint statement last month that the proposed law will open up public sector banks for liquidation or amalgamation, which could put the deposits of customers under severe risk. Worse, provisions dealing with deposit insurance are ambiguous in the draft law, with no explanation on the amount to be insured by the banks.

The bill also provides for a bail-in option, which means depositors could lose control of their money – essentially be forced to bear a loss on their holdings – which could be converted into securities such as shares in the bank in case the bank’s financial situation deteriorates.

Over and above these concerns, some people in the banking sector also feel that the new law erodes the powers of the Reserve Bank of India substantially by creating what is called a Resolution Corporation, which will oversee all matters relating to restructuring of these financial institutions.

The new law

A joint parliamentary committee is currently studying the draft Financial Resolution and Deposit Insurance Bill, 2017. The committee is expected to come out with its report soon, following which the bill is likely to be taken up for legislative approval in Parliament.

The locus of the proposed law could be found in the February 2016 Budget speech of Union Finance Minister Arun Jaitley, who said that the government was keen on setting up a framework that would instill better financial discipline among banking institutions and make stronger provisions to protect public money.

Matters moved swiftly after this announcement. A committee under Ajay Tyagi, additional secretary of the Department of Economic Affairs, was set up in March 2016. The committee released the draft law in September that year. The government gave the public less than 20 days to comment on the draft bill, and this process of discussion was closed on October 14, 2016. The following June, the Union Cabinet cleared the bill, which was later tabled in Parliament in August, just a day before the Monsoon Session came to an end.

Political parties, including the Congress and the Trinamool Congress, expressed their displeasure at the manner in which the bill was tabled and also criticised the move to form a new joint committee to study the draft when a select committee for finance was already available.

The Resolution Corporation

The primary concern expressed by banking unions is the provision in the law that creates a new Resolution Corporation.

CH Venkatachalam, general secretary of the All India Bank Employees Association, said that so far, the Reserve Bank of India had exclusive powers to determine the financial health of a bank and recommend remedial measures in case banks got into financial trouble. But the proposed Resolution Corporation will usurp this crucial power, thereby weakening the regulatory role of the Reserve Bank of India.

“The new law seeks to amend all exclusive laws governing financial institutions, including the State Bank of India Act,” he said.

The proposed Resolution Corporation will determine if there is an “imminent risk” of the bank failing financially and will trigger what it feels would be the right remedy. It will also replace the Deposit Insurance and Credit Guarantee Corporation and take over the role of providing deposit insurance.

According to Chapter II of the bill, the corporation will have a chairperson and one representative each as ex-officio member from the finance ministry, the RBI, the Securities and Exchange Board of India and the Insurance Development and Regulatory Authority. It will also have a maximum of three full-time members appointed by the Union government, and two independent members. Banking unions said that the very composition of the corporation will give supreme powers to the Union government rather than the RBI to determine the fate of a bank.

Thomas Franco of the State Bank of India union said that the new bill raised a larger systemic question. “The State Bank of India Act makes it clear that the bank cannot be liquidated,” he said. “The new law is getting rid of this important provision.”

Franco added that the Bill, in the form it is currently in, looks like the launching pad for further diluting public sector banks. “Instead of taking on the non-performing assets problem, which was created by corporate defaulters, the government is attempting dilution of banks,” he said.

The government, however, has consistently maintained, as seen from the objectives of the bill itself, that the new law will only bring in more financial discipline. It will compliment the new bankruptcy code put in place in 2016 that aims at recovering defaulted loans.

Venkatachalam pointed out that the law gives all powers to the Company Law Tribunal in case of liquidation. This, in the context of public sector banks, is unwarranted. “The public sector banks are currently not covered under the Companies Act,” he said. “So why this provision? They should continue to be governed exclusively by the Banking Regulations Act.”

Under the proposed law, no court other than the Company Law Tribunal will be able to take cognisance of disputes on liquidation.

There is also a major concern of the violation of labour rights. There are clauses in the bill that enable the Resolution Corporation to terminate employment or change the compensation structure of bank employees when the bank goes through various stages of resolution. The employees may not be able to claim compensation for loss of employment, which, unions said, is a direct violation of the right to constitutional remedies guaranteed under Article 32 of the Constitution.

The bail-in clause

The bail-in clause included in the proposed law is perhaps the provision that immediately affects depositors.

A bail-in clause is one where the creditors of the bank would be forced to bear a part of the loss in case the institution sinks. All depositors are considered creditors in banking terms. In fact, they are unsecured creditors, in the sense that no depositor seeks security from banks while making their deposits. The bank uses these deposits to extend loans and earn interest.

Under the proposed bill, a bail-in will be triggered in consultation with the appropriate regulator, which in the case of banks would be the RBI, if the proposed Resolution Corporation is satisfied that a bank needs a dose of capital to absorb losses and continue to function without breaking down. This clause excludes insured deposits, which, under existing rules, means a sum of up to Rs 1 lakh with interest would be protected. The rest of the amount could be converted into securities like stocks of the bank.

A senior banking executive of the Indian Bank said on condition of anonymity that this was perhaps an improvement from the existing scenario, where amounts over Rs 1 lakh would be lost completely. “Your money will be converted into a security instead of being lost,” the banker said.

But Franco is not convinced by this argument. “There is an assumption here that the bank will recover after the capital infusion,” he said. “What if it doesn’t? What will be the worth of the equity then?”

Also, depositors put their money in public sector banks because they know the government will bail out the bank if it collapses. But through the new bill, the government is virtually indicating that there will be no bail out from its side.

“This bail-in provision will only create panic,” said Franco. “The moment news gets out that a bank is financially sick, there will be a rush to take deposits out as confidence of a government bail out does not exist.” This will only expedite the fall of the bank.

Those opposing the new law argue that its fundamental idea is to transfer the burden of non-performing assets created by corporate defaulters to the common people. “Bail-in means bailing out big corporate defaulters,” Venkatachalam alleged.

Source: scroll.in

Importance of salary account

5 reasons why you should not ignore your saving bank account

A savings bank account can literally help you save some money. Barring a few banks offering 6 percent on savings account balances, most of them pay you a not-so-attractive rate of interest of 3.5 percent on the balance, but also it brings you a whole lot of services and benefits which can be tapped to create wealth. Here are five reasons you should not ignore your good old savings account.

Stepping stone: A savings account is seen by many money experts as a means to accumulate wealth. However, not many millennials look at it that way. Invariably many of us end up with multiple bank accounts by the time we turn thirty – thanks to changing jobs and changing cities.

However, such a situation must be avoided. Not only does it make us maintain minimum balances or get saddled with a list of dormant accounts, it also means messed up finances. Changing jobs cannot be avoided and you may keep getting a new bank account with each jump, but ensure that you keep one bank account that is used as a ‘savings and investment’ account. This helps to streamline your finances, acting as a firm stepping stone that ensures you have a smooth financial journey.

Charges: If you ignore bank accounts and let them dry up, there is a chance that the bank will levy penal charges for non-maintenance of minimum balance. This will burn an unnecessary hole in your pocket. You should also note all other charges that come with each savings bank account. Some savings accounts offer many free facilities such as free fund transfers, demand draft, bill pay services. If you know about them well in advance, you can make the most of them.

Means to pay: Though we pay our equated monthly installments for all loans out of our savings account, we rarely use it to pay bills. If you are not using credit cards and debit cards, your bills can be paid before the due date by issuing standing instructions on your savings account. Most new generation banks offer innovative bill services along with their savings account product. Such bill pay programmes give customers reward points that can later be redeemed for goodies or gift-vouchers.

Timely payment of bills, including credit card outstanding by way of standing instruction on savings bank account, ensures that there is no wastage of money because of late payment charges or penal charges.

Investments: A savings account is an enabler when it comes to the world of investment. You cannot invest in mutual funds without a bank account. The bank account gives you access to traditional products such as recurring deposits and fixed deposits. These products with low risk can be of immense importance if you are looking for some solutions to save for a financial goal that is less than couple of years away from being realised.

Some bank accounts offer you facilities such as auto sweep. It invests idle sum lying in your bank account into fixed deposits if the sum exceeds a threshold, say Rs 25,000. This ensures that even if you forget to invest money in your account, the money is put to work. Savings accounts with such facilities should be preferred over the rest.

Tax on saving bank account interest: Interest paid on the balance in the saving bank account is taxable in the hands of the bank account holder. However, there is a way to reduce the tax impact. Section 80 TTA provides for a deduction upto Rs 10,000 for aggregate of interest earned by you on all the saving bank account whether with bank or a post office. Ensure that you report your interest income on savings account while filing your income tax returns and pay tax on it, if it exceeds the threshold.

Savings bank account if used wisely can open doors to financial freedom for you.

Source: moneycontrol.com