RBI suggests free credit counselling

The Modesty Depository Financial Institution of Republic Of Republic Of India have suggested Banks to constitute fiscal literacy and counselling Centres (FLCCs) in both rural and urban India, which would supply free counselling to people.

The bill of exchange if implemented would take forward the current recognition counselling enterprises by some banks, namely Depository Financial Institution of India's Abhay, ICICI Bank's Disha Trust and Depository Financial Institution of Baroda's Grameen Paramarsh Kendras.

The counselling Centres should be able to take up a lawsuit on behalf of the customer, states the run batted in draft. "There is a demand for recognition counselling Centres to be empowered for liaising and negotiating with Banks on behalf of their customers," it says.

Offering recognition counselling could be made a portion of just loaning codification for Banks in owed course, the cardinal depository financial institution said.

The threat of recovery agent too can be delt with through the recognition counselling centres, happens the cardinal bank. "RBI may sensitise Banks to give owed consideration to the debt direction program prepared by such as FLCCs before resorting to recovery measures," it said.

On single-creditor-debts the run batted in said, "The FLCCs could help the borrower in negotiating with the depository financial institution concerned. In lawsuit of multiple credits availed of by individuals, the FLCCs may negociate with the bank/s having the biggest exposure to reconstitute the debt and the recoveries to be shared on a pro-rata basis."

But their work Michigan there: "The FLCCs would, however, not affect themselves in recovering and distributing money. This would be left to the depository financial institution concerned, or the depository financial institution having the biggest exposure to move on behalf of all the banks."

The measure is aimed at bringing in more than husbandmen into the organised adoption ambit, instead of money lenders, who bear down a high involvement rate.

While in the urban areas, "The aggressive selling of personal loans and recognition card game to vulnerable subdivision of borrowers could also have got effects of over- liability and rising NPAs," run batted in said.

However, when the Banks put up such as recognition counselling Centres there should be appropriate 'firewall' between a depository financial institution and the counselling Centre set up by it.

"Financial instruction should be clearly eminent from commercial advice; codifications of behavior for the staff of fiscal establishments should be developed."

The bill of exchange is unfastened for public remarks and suggestions till April 30, 2008.

Under licence from

Safe haven, secure returns

PPF is a good instrument for investors as it lets flexibleness and taxation benefits.

Investor: There are a batch of options under subdivision 80 C. Which, according to you, is the best one?

Advisor: Though it will differ from investor to investor, in my view, Populace Provident Fund or PPF is among the best instruments under subdivision 80C.

Investor: How makes one unfastened a PPF account?

Advisor: You can open up an business relationship in your ain name or in the name of a minor, if you are the guardian. An business relationship can also be opened on behalf of a Hindoo Undivided Family (HUF). You can also have got a separate PPF account, in malice of having an Employees' Provident Fund (EPF) account.

However, you can have got only one PPF business relationship in your name. Account can be opened with a at State Depository Financial Institution of Republic Of Republic Of Republic Of India or Depository Financial Institution of India, Central Depository Financial Institution of India and Depository Financial Institution of Baroda as well as and at any caput station business business office or general station office.

Investor: What is the continuance of the account?

Advisor: On paper, it is a 15-year account. However, the term of office actually works out to 16 years, since you can do a part in the 16th twelvemonth also.

Investor: What is the lower limit balance to maintain the business relationship alive?

Advisor: Not less than Rs 500 and not exceeding Rs 70,000 in a fiscal twelvemonth in hunk sum of money or in episodes of Rs 10 but not more than than 12 episodes in a year.

Investor: How are tax returns decided on PPF?

Advisor: The involvement is fixed by the government. At present, it is 8 per cent compounded annually. To acquire the upper limit returns, do sedimentation in the first few years of the month.

Investor: Are backdowns possible?

Advisor: The full amount can be withdrawn on adulthood after 15 years.

However, you can also retreat before adulthood from 7th twelvemonth onwards, but only once every year. The amount to be withdrawn should not transcend 50 per cent of the balance at the end of the 4th twelvemonth or the twelvemonth immediately preceding the withdrawal, whichever is lower. If you go on the business relationship after 15 old age and go on to deposit, you can retreat up to 60 per cent of the balance at the beginning of each drawn-out time period (block of five years). Investor: Can I acquire a loan from my PPF account?

Advisor: Yes, you can take a loan from the 3rd twelvemonth onwards. However, you cannot take a loan after you go eligible for the backdown facility. The loan amount should not transcend 25 per cent of the amount to your recognition at the end of the preceding fiscal year.

Investor: What are the taxation benefits?

Advisor: The sedimentations (even those in the name of your partner or minor children) are eligible for a taxation deduction. Interest accumulation and backdowns are also exempt from income tax, and the balance in the business relationship is exempt from wealthiness tax. For entrepreneurs, there is an added advantage as your PPF concern relationship cannot be attached by the courts, in lawsuit their business travels bankrupt. Investor: From the retirement planning point of view, how good is the product?

Advisor: PPF business relationship is the most effectual tax-saving vehicle giving you astonishing benefits because

Your money is absolutely safe. You have got the flexibleness of contributing varying amounts of between Rs 500 and Rs 70,000 a year, depending on your fiscal situation. The business relationship can be kept "alive" by depositing just Rs 500 a year. The income from PPF is fully exempt from income tax.

Investor: What are the drawbacks?

Advisor: Very few. The term of office of the PPF strategy is 15 years, which do it less attractive for aged people. Although partial backdown is allowed from the 7th year, it is limited to 50 per cent of the balance in your business relationship at the end of the 4th year.

(The author is a hired accountant)

Reverse mortgage products receive modest response

The
innovative contrary mortgage product, announced by finance curate Phosphorus Chidambaram
in the Budget for 2007-08, have received a modest response from the targeted
borrowers. This is because of ambiguity in taxation issues, and even cultural taboos. But since there is a important ageing population who could potentially benefit
from this scheme, Banks are hopeful that the strategy will acquire popular in due
course. Chidambaram had stated
that National Housing Depository Financial Institution (NHB) will present a contrary mortgage strategy for
senior citizens. After the contrary mortgage guidelines introduced by NHB,
several Banks and Deewan Housing Finance have got launched the strategy for senior
citizens. The Banks that have got launched the strategy are Punjab National Bank,
State Depository Financial Institution of India, Depository Financial Institution of Baroda, Allahabad Bank, North American Indian Depository Financial Institution and private
lender Axis Bank. Under this
scheme, the place is pledged with a bank, which pays a monthly installment to
the individual for a fixed clip period of time. At the end of these payments, the
property belongs to the lender. Housing regulator NHB have written to Central
Board of Direct Taxes, asking that the loan given to the senior citizen should
be exempted from Income-Tax.

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Officials say
that this is a demand driven merchandise and is not marketer driven. It is available
for anyone who wishes to choose for this product. The quality of the underlying
security championship a mortgage is important, they said. Going forward, the product
can also given rise to trading in mortgage-backed
securities. Sir Joseph Banks also need
clarity on the provisioning they necessitate to do for such as loans.