Second Communication to RBI date Sept 30 2014 -Floating interest rate not reducing automatically in loan accounts

Below shown is the my Second Communication to RBI date Sept 30 2014 -Floating interest rate not reducing automatically in loan accounts. This is the reply to communication from RBI.

Dear Sirs,

    Thanks for acknowledging my complaint. I would like to pin point a particular line of text on the circlular Interest Rates on Advances DBOD No.Dir.BC.13/13.03.000/2014-15 dated July 01, 2014. I have highlighed it in yellow .Here it says in case of existing loans banks should take consent of concerned borrower to reset the floating rates. In reality what happens is floating rate of loan goes up irrespective of borrower consent. But to bring it low borrower should write a written consent.  This isnt fair..right?

In my particular case. My loan account with number 0000006705******* (State Bank of Travancore, Branch: ****************) had a floating interest rate of  10% on 9th May 2007 (Starting of loan). Later the rate changed to 12.75% automatically. Later when i happened to walk in to branch around mid 2014 i submit a written request to bring it back to 10.25%.

My question is if floating interest rate goes up automatically, why cant it goes down automatically too?  Isnt it cheating by all Banks making use of the highlighted clause (that too technically incorrect manner)? Any common man who have dealt with loans with banks has faced this issue. May be banks cover it legally from terms sheet which we sign at the time of taking a loan.

The result is Banks loot crores of Rupees additional from loan borrowers even if the standard floating interest rates is revised and not getting reflected on individual loan accounts.

Please take this matter seriously and let me know what RBI can do to prevent this. Do move this to higher authorities, who can take a call on this.  If you want me to submit / do anything else am happy to help you. If you want me to come over and present my case i can do that too.

Thanks,

Ajith George

Co-Founder & COO

Finahub

Reference: (Circlular Interest Rates on Advances DBOD No.Dir.BC.13/13.03.000/2014-15 dated July 01, 2014)

2.4 Floating Rate of Interest on Loans

Banks have the freedom to offer all categories of loans on fixed or floating rates, subject to conformity to their Asset-Liability Management (ALM) guidelines. The methodology of computing the floating rates should be objective, transparent and mutually acceptable to counter parties. The Base Rate could also serve as the reference benchmark rate for floating rate loan products, apart from external market benchmark rates. The floating interest rate based on external benchmarks should, however, be equal to or above the Base Rate at the time of sanction or renewal. This methodology should be adopted for all new loans. In the case of existing loans of longer / fixed tenure, banks should reset the floating rates according to the above method at the time of review or renewal of loan accounts, after obtaining the consent of the concerned borrower/s.

Reply from RBI: date Sept 24 2014 -Floating interest rate not reducing automatically in loan accounts

Below shown is the reply i got from RBI in Sept 24.

Dear Sir,

We acknowledge receipt of your compliant and request you to submit us of any specific case so as to take up the matter further. In this connection, the instructions relating to interest rates on advances are available in our master circular DBOD No.Dir.BC.13/13.03.000/2014-15 dated July 01, 2014, which is available on our website www.rbi.org.in  under notification -> master circular .

 With regards,

**************

**************

First Communication to RBI date Aug 30 2014 -Floating interest rate not reducing automatically in loan accounts

Below shown is my first communication / complaint with RBI regarding banks cheating on floating interest rates. I will update the responses and reply's as follow up blog posts.

Dear Sir,
   I would like to bring to the notice of RBI about a practice of many Banks in India including govt owned banks.

Banks are offering loans in Floating Interest rate to most of its customers. This interest rate is indirectly controlled by RBI and banks make periodic adjustments on this interest rate and it is supposed to get into effect of loan accounts. The problem is ,  Interest rate of peoples loan account goes up automatically according to RBI norms. But it will not come down automatically even if RBI reduces interest rate. For that you need to submit a request in written signed at the bank branch. 

This is followed in most of the banks like State Bank of Travancore , SBI , other private banks etc. Most people are not aware of it, so people are forced to pay more interest rate even if the interest rate of the bank went down.

My housing loan account from SBT faced this issue. Many of my friends and relatives also faced this issue from different banks.

I request Reserve Bank of India to take a look at this issue and take steps to manage.


Thanks,
Ajith George

Co-Founder & COO
Finahub

True Cost of Commuting - Infographic

True Cost of Commuting - Infographic

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Via: Streamline Refinance

How to Redeem your Mutual Fund?

Many people who invest in mutual funds often do not know what the procedure to redeem these mutual funds. I redeemed some of my mutual funds recently which I had bought some years back from an agent, so I thought why not let everyone know what is the simple procedure for redeeming the mutual funds.


If you have bought the mutual funds from an agent or from the AMC directly, then you will have to fill up the redemption form. This form is available from the mutual funds AMC office (you can get its office address from internet). You will have to go to their office in person. You can also go to the nearest CAMS office and fill up the redemption form directly from there.  It’s much convenient to visit CAMS office and directly redeem more than one mutual funds in one go (I did this, this way).

The redemption form is very easy to fill and all you need to put is your name, folio number (make sure you put correct folio number, else it will create issue later) and the number of units (exact number or ALL) you want to redeem. Just give this form to the CAMS processing assistant and they will put up your request. The real advantage is that there is no FEES for his service from CAMS


Points to remember...


1. NAV Applicable: If you give your redemption request before 3:00 pm, the same day closing NAV will be applicable, else you will get next day NAV. So make sure you do the redemption well before 3:00 pm if you want same day NAV.

2. Bank accounts: Where will you get the money when you redeem the mutual funds? You will get the proceeds in your same account which is registered with your AMC (which you used to pay at the time of buying). If that account is not active, then there are few run around like you will have to attach the cancelled cheque of your new bank account or copy of pass-book etc and if you don’t have that, then a declaration from the bank and sign of some bank manager etc. So this can be a little frustrating if you are in urgent need of money. In my case my old account was active so it was pretty easy for me.

3. CAMS do not handle all the AMC’s redemption: CAMS do not handle each and every Mutual funds transaction. It can happen that you will have to go to the AMC office itself for redemption. So check with CAMS which all mutual funds they handle, you can shoot an email to your city CAMS (their emails and addresses are there on CAMS website

4. How much time it takes to get money? : It generally takes 3-4 working days to get the money credited in your account. So if you redeem the funds on Monday or Tuesday, you can safely assume that you will get the money by the weekend. But if you have weekend falling in between, then it can take some time.

US Debt Crisis Explained in a Simple short Video

Now the buzz among people is about the US debt crisis and the S&P rating. Here is a simple short video explaining what really is a US Debt Crisis

Union Budget highlights for middle class man

1     Personal income tax exemption limit raised to Rs 180,000 from Rs 160,000 for individual tax payers
2    For senior citizens, the qualifying age reduced to 60 years and exemption limit raised to Rs 2.50 lakh.
3    Citizens over 80 years to have exemption limit of Rs 5 lakh.
4    No change in Tax exemption limit for Women
5     To reduce surcharge on domestic companies to 5 percent from 7.5 percent.
6     A new revised income tax return form 'Sugam' to be introduced for small tax papers.
7     To raise minimum alternate tax to 18.5 percent from 18 percent
8     Service tax rate kept at 10 percent
9    Service tax widened to cover hotel accommodation above Rs 1,000 per day,   A/C restaurants serving liquor,      some category of hospitals, diagnostic tests.
10    Central Excise Duty to be maintained at standard rate of 10%.

Should you invest in ULIPS?

Recently there were several changes to the ULIP’s.But one should keep in mind that it’s core has not changed. They still remains as a long term investment cum insurance plans which always miss sells to customers. I always heard people talking that their investments are mainly in equity's which even give them insurance coverage for free. Yes they were being told like that by the agents. Final result will be that these huge entry loads ranging from 30 to 40% makes their investment un viable and this leads to false education regarding the entire equity investment. Let’s try to see who all and when all and what all things we should consider before investing in ULIPS.

Who should choose ULIPS?

A person who invests in ULIPS should be willing to invest in Equity’s. Choosing debt funds in ULIPS will be a tragedy as despite the high charges of ULIPS the returns from debt instruments will be too low, which may always result in a loss of your investments. The advantage of ULIPS is on the switching feature. So for the one who know the dynamics of markets he can switch from equity and debt as the BULL and BEAR side of market comes in to play.

Which type of plan is good for you?

The main problem of ULIPS is that the insurance converge is too low. Imagine getting 2 Lakh coverage when the total premium for first 3 years is 2 Lakhs and more. So to get the most of it, one should try to choose the plans which will give enough coverage as required for a longer period. Some even cover till 90 yeras of age.
Another problem is with the amount getting after the death of the insurer. Some ULIPs give either the fund value or the some assured..choosing which one is higher. Here a normal user should choose the fund which will give both the fund value and Sum Assured.

Conclusion

To enjoy the benefits of ULIPS, one should invest for at-least 10 years. Coz for the first 3 years the load charge are huge and negligible there after. Also should opt for plans which will have a good coverage as per your requirement. So if you are an investor who want a plan to save for your childrens college education in 10 years time...ULIPS are for you. For others please choose Mutual Funds or direct investments in Stocks.