Senior Citizen Savings Scheme

With the reduction of Interest rates on Fixed Deposit Schemes,concerns of senior citizens are where to invest and how they get regular income with safety. The answer to this is Post Office Senior Citizen Scheme or SCSS. Let us discuss about this scheme in detail.

Senior Citizen Savings Scheme
Post Office Senior Citizen Scheme or SCSS is 5 years one-time deposit scheme.

Who can invest in Post Office Senior Citizen Scheme or SCSS?

• An individual who attained the age of 60 years of age or above on the date of account opening.
• An individual who attained the age of 55 years or more but less than 60  years of age and has retired on superannuation or under a voluntary or special voluntary scheme. But they can open this account only on a condition that the account is opened within one month of receipt retirement benefits and amount should not exceed the amount of retirement benefit.
• Retired personnel of Defence Services (excluding civilian Defence employees) without any age restrictions. But they have to fulfil other limits specified in the rules.
• NRIs and HUF are not eligible to open this account.

Where to open Senior Citizen Savings Scheme or SCSS?

You can open Senior Citizen Savings Scheme either in post office or with recognised 24 PSU banks and one private bank.

The list of 24 nationalised banks are :
State Bank of India, State Bank of Hyderabad, State Bank of Bikaner and Jaipur, State Bank of Patiala, State Bank of Mysore, State Bank of Travancore, Allahabad Bank, Andhra bank, Bank of Baroda, Bank of India, Bank of Maharashtra, Canara Bank, Central Bank of India, Corporation Bank, Dena Bank, Indian Bank, Indian Overseas Bank, Punjab National Bank, Syndicate Bank, UCO Bank, Union Bank of India, United Bank of India, Vijaya Bank and IDBI Bank. 

One private bank allowed to open this scheme is ICICI Bank.

How to open Senior Citizen Savings Scheme or SCSS?

• Fill the Form A of account opening.
• Deposit Amount-If deposit amount is less than one lakh, then it is accepted in cash. If it is more than Rs.1 lakh then either in cheque or DD.
• Two passport size photographs.
• Age Proof like Passport, Senior Citizen Card, Birth certificate issued by MC/Gram Panchayat/District office of registrar of births and death, Voter ID card, PAN card, Ration card, Date of birth certificate from the school or Driving license.
• Address and Identity Proof like passport or PAN card.
• You must carry original documents for KYC verification purpose.

How much one can invest in Senior Citizen Saving Scheme 0r SCSS?

• Minimum of Rs.1,000 and in multiples of Rs.1,000.
• Maximum of Rs.15 lakh.

One can open multiple accounts either in an individual capacity or jointly with spouse. But the maximum limit including all his accounts must not cross the maximum limit of Rs.15 lakh.

What is the rate of interest of Post Office Senior Citizen Scheme or SCSS?

Earlier, the interest rate on SCSS used to be declared once in a year. But not it is declared on a quarterly basis like April-June, July-September, October-December, and January-March. Refer my earlier post for the recent changes done in interest rates at “Post Office Savings Schemes -Changes effective from 1st, April 2016“.

So as per this, the interest rate for April-June quarter of 2016 is 8.6%. But in many posts, articles or even RBI mentioned that SCSS compounding frequency is on quarterly. However, when the depositor getting the whole interest earned on quarterly base then where comes the quarterly compounding effect.

How they pay the interest for Post Office Senior Citizen Scheme or SCSS?

Interest will be payable on the quarterly basis on 1st working day of April,  July, October and January. If you fail to claim such quarterly interest, then this interest amount will not earn any further interest. It will be kept idle. For the first time it is paid from the date of deposit to 31st March/30th June/30th September/31st December and then every quarter.

Interest is rounded off to a rupee. Like if the interest is less than 50 paisa is ignored and more than 50 paisa is rounded off to a rupee. There will not be any compounding. So for example, if you deposited Rs.1,00,000 and interest rate at 8.6%, then for a year it fetches Rs.8,600. This they divide into 4 (because they pay it in 4 quarters) and pay you Rs.2,150.

Duration or maturity of Post Office Senior Citizen Scheme or SCSS

It is 5 years fixed deposit kind of product. After the completion of 5 years, you have to submit the written application along with passbook and Form E.

In case you not close the account after maturity and also does not extend  the account, the account will be treated as matured and you will be entitled to close the account at any time. However, post-maturity interest at the rate as applicable to the deposits under the Post-office Savings Accounts from time to time will be payable on such matured deposits up to the end of the month preceding the month of the closure of the account.

What happens in case of death of depositor?

In case of death of the depositor before maturity, the account will be closed and deposit refunded along with interest to nominees or legal heirs if the nomination was not made or in case of death of nominee.

If the total amount including interest payable is up to Rs.1 lakh, it may be paid to the legal heirs on production below documents.

• Letter of indemnity
• An affidavit
• A letter of disclaimer on an affidavit
• A certificate of death of the depositor on stamped paper in the form as in Annexure to Form F.

Whether Pre-mature withdrawal allowed?

Yes, but with certain conditions. You are not allowed to withdraw within one year of account opening. You have to fill the Form E for this early withdrawal.

• In case the account is closed after the expiry of 1 year but before the expiry of 2 years from the date of opening of the account, an amount 1.5% of the deposit shall be deducted and the balance paid to the depositor.
• In case the account is closed on or after the expiry of 2 years from the date of opening of the account, an amount equal to 1% of the deposit shall be deducted and balance paid to the depositor.

Whether one can extend the Senior Citizen Saving Scheme or SCSS?

• Account will not be extended automatically.
• You can extend for a period of 3 years after 5 years maturity period. However, you have to submit Form B within one year from the date of maturity.
• Also, such extended accounts can be closed after one year of extension without any penalty. Means after completion of 6th year, one can withdraw the amount without any penalty.
• Interest rate during such extension period will be as per prevailing rate of interest after 5 years maturity.
• Only one extension is allowed to the old account. Means after 5 years completion of SCSS, you can extend only for once. After that, the account will be matured.
• However, you are free to open one more account during the old account tenure or after maturity of old account subject to the maximum ceiling of Rs.15 lakh.

Whether one can nominate?

Yes, you can nominate one or more than one persons. Also you can nominate, change, or cancel before the maturity as and when you wish. You have to submit Form C and present the passbook for registering, changing or cancelling the nomination. This service is totally free and there is no fee to it.

In case of joint account deposit. The nominee will come into picture only after the death of both joint account holders.

Whether loan facility is available?

No, you are not allowed to avail the loan by pledging it. Because this scheme is meant for regular income from your investment.

Whether transfer facility is available?

Yes, one can transfer Post Office Senior Citizen Scheme deposit from one office to another office. You have to fill Form G and enclose the passbook. If the deposit amount is Rs.1 lakh or above, a transfer fee of Rs.5 per Rs.1 lakh of deposit for the first transfer and Rs.10 per Rs.1 lakh of deposit for the second and subsequent transfers will be payable.

However, SCSS deposit can’t be transferred to others or it can’t be traded.

What if you break the Senior Citizen Saving Scheme or SCSS rules and deposited the amount?

Many may break the rules in lure of higher interest rate. So if banks or post office found that there is any break of rules from depositor, then the account will be closed immediately. Amount will be refunded after deducting the entire interest paid to such deposit from starting to till date.

Joint Account Rules of Senior Citizen Savings Scheme or SCSS–

• You can open the Post Office Senior Citizen Scheme scheme jointly with spouse ONLY.
• The age of first account holder will be verified for eligibility. But not the spouse of a first account holder.
• In the event of a death of first account holder, then second account holder continue as primary account holder but with the condition that the maximum overall limit of the second holder must not cross Rs.15 lakh.
• Even though it is joint account first holder is attributed to the scheme. There is no sharing from a joint holder.
• Both individuals can open as many accounts as they can subject to the maximum ceiling of Rs.15 lakh based on their eligibility condition either individually or jointly.
• In case the first holder dies and second holder continue the scheme but if his/her limit crossed the maximum ceiling of Rs.15 lakh from all accounts, then such over and above Rs.15 lakh will be refunded to him/her.
• If both spouses holding individual accounts and either of spouse dies means the survivor can’t continue the account. They have to close the deceased spouse account.

Tax Benefits of Senior Citizen Savings Scheme or SCSS

• During Investment-One can avail up to Rs.1,50,000 as a maximum benefit under Sec.80C by investing in SCSS scheme.
• Interest Income-Interest income is treated as taxable income. Hence, there is no tax benefits. It will be taxed as per your tax slab. TDS can be deducted on interest earned if it exceeds the minimum limit prescribed by the Government which currently is Rs 10,000 and TDS is 10%.
• If your income falls before basic exemption limit (Currently, if your age is below 60 years then it is Rs.2.5 lakh and for above 60 years it is Rs.3 lakh), then you can submit Form 15G (if your age is less than 60 years) or Form 15H (if your age is 60 years or above) to avoid TDS. However, in case the tax is already deducted, then you can file IT return on your own and claim the refund.

10 Things To Remember on new debit card PIN rule

  Payment through cards has become increasingly popular in India. To maintain security and keep up with the changing times, the Reserve Bank of India has mandated debit card holders to punch in their PIN numbers during every transaction from December 1.

Here are some things you need to know about debit card usage:

1) The RBI rule was first enforced in June 2013 to act as an additional layer of security in transactions. However, banks had requested for some time to update the back-end infrastructure. The RBI had then extended the deadline to November 30.

2) As part of the rule, customers will now to have punch in the PIN number after the card has been swiped or inserted in the small point-of-sales (PoS) terminal. This is the small machine that shops and merchants use for the payment. Once the PIN has been entered, you will get the transaction charge slip, which has to be signed.

3) If the PoS terminal is not updated to ask for PIN, and the transaction proceeds without it, then the bank will decline the transaction.

4) The PIN being used here is the same that a customer uses at an ATM or Automated Teller Machine to withdraw money. Do not get confused with the ‘transaction password’ used for online banking.

5) You will get only three chances at punching the right PIN number. After that, your transaction will automatically be cancelled. If you manage to remember your PIN number after three attempts, you can still use your debit card. However, the transaction will have to be started all over again from scratch.

6) If you have forgotten your PIN number, call your bank to order for a duplicate PIN number. You will, however, have to verify your personal details like address, email id, date of birth, etc., for security purposes. This will be posted to your address within 7-10 working days.

7) This rule is mainly for debit cards being used for physical transactions only. There is no change in the way internet transactions are undertaken. The rules for credit cards too remain unchanged.

8) This is part of the measures undertaken to deal with frauds and security breaches. Other measures include addition of an Europay, MasterCard or Visa chip on the card, establishment of real-time fraud monitoring system, limit on transactions, immediate notifications, etc.

9) There are over 36 crore debit cards being used in India to conduct as many as 5.54 crore merchandise transactions per month amounting to Rs 8,017.86 crore. There are as many as 52 crore transactions being conducted using ATMs in a month, as per the latest RBI data.

10) In contrast, there are 1.8 million credit cards in use. The total number of transactions being conducted at PoS counters too is less at 4.14 crore. However, the total value of transactions is higher than that for debit cards at Rs 10,748 crore.

Source: Simplus Information Services | Yahoo Finance India

Dumbest Financial Blunders

 There are many incidents where losses in Financial transactions happen due to some blunders which could have been avoided.

Here are 8 such interesting cases where Financial blunders have occurred due to avoidable mistakes, negligence and ignorance:

1. Banker Falls Asleep on His Keyboard - Transfers $293M

 

Instead of catching some Zs, he lost some $. An unnamed German employee of an unnamed German bank made worldwide headlines when he accidentally transferred 222,222,222.22 Euros ($293 Million) instead of 62.40. What was his reason? He claims that he fell asleep for an instant†while typing the number 2, resulting in the colossal blunder. But it was his supervisor who was reprimanded and sacked. However, the error was quickly corrected, the supervisor eventually got her job back, and hopefully the employee got some rest.

 

2. Woman Throws Away $1 Million Lottery Ticket

 

This is Sharon Jones, who "found" the ticket.

 

Here's a strange story for our Financial Blunder list, and one that has a happy ending. Sharon Duncan purchased a Diamond Dazzler lottery ticket at the Super 1 Stop in the tiny town of Beeb, Arkansas in July 2011. When she scanned it, it did not come up as a winner, and she tossed it in the bin below. Along came Sharon Jones, who combed through the trash, found the discarded ticket, and discovered that it was indeed a $1 million dollar winner. Elated, Jones spent a lot of the money on herself and her children, only to be brought to court by the convenience store manager, who claimed Jones took the ticket from the bin that had a sign saying 'Do Not Take' When Duncan got wind of it, she joined the suit, claiming that she was misled by the scanner reading and deserved the winnings. A judge and jury debated the matter and returned the decision in Duncan's favor, meaning that Jones would have to return the money she spent. Jones appealed, but before the case could go back to the courts the parties settled out of court for an undisclosed sum.

 

3. PayPal Accidentally Puts $92 Quadrillion in a Man's Account

 

"We regret to inform you of our grievous error."

 

Pennsylvania resident Chris Reynolds opened his monthly PayPal statement in his email to find a balance of $92,233,720,368,547,800. He was stunned, and posted a photo of the document for his friends to see on Facebook. But before he could go on a spending spree, PayPal recognized their error and took back the gargantuan sum. As a kind gesture, the company made a modest donation to an undisclosed charity of Reynolds' choice.

 

4. Fed Spends $120 Million Due to a Printing Glitch

 

Talk about a printer jam; It turns out there was a problem with the new $100 bills that were being printed by the US Treasury... a $120 million dollar problem. Originally scheduled to be issued in 2011, these new high-security C-Notes were announced with big fanfare. However, as the the first billion notes rolled off the presses, it was discovered that sporadic creasing of the paper had caused a small sliver on some of the bills to be printed incorrectly. This glitch caused a 2-year delay in the release of the new bills as they sorted the good from the bad, costing $120 million extra... at the US taxpayers' expense, of course!

 

5. 12-Year-Old Misspells a Word on Jeopardy! and Loses $3000

 

Alex Trebek said it was "badly misspelled."

 

It seems like a pretty innocent mistake, given the age and the circumstances. Nonetheless, Thomas Hurley III's misspelled answer for Final Jeopardy! cost him the $3000 wager. The correct written response to the answer was What is the Emancipation Proclamation? (Jeopardy! contestants must guess the correct question), but Hurley spelled it Emanciptation Proclamation [sic] and host Alex Trebek and the show judges deemed it incorrect. ABC producers responded to the decision by saying, "If Jeopardy! were to give credit for an incorrect response (however minor), the show would effectively penalize the other players. Still, that doesn't sit well with a lot of people who felt Trebek and company cheated a little boy out of his hard-earned cash.

 

6. Bank of America Glitch Allows a Gambler to Withdraw (and Lose) $1.5 Million

 

In a situation similar to a drug addict being allowed unlimited access to crack cocaine, retired Flint Michigan autoworker Ronald Paige discovered that he was able to withdraw vast sums of money from Bank of America ATMs. For 14 days, Paige was able to withdraw - and subsequently gamble away - the bank's money due to a glitch in their ATMs at several casinos in the area. During his almost non-stop spree (he went 36 hours without sleep) he had withdrawn $1,543,100. Paige was completely apologetic. Nonetheless, he was sentenced to 15 days in prison and ordered to repay the $1.5 million in installments from his $2000 monthly pension.

 

7. Woman Sells a $20 Jacket with $18,000 Diamond Earrings in the Pocket

 

This is Dori Rhodes before her $18k mistake.

 

Talk about regrets... Huntington Beach resident Dori Rhodes donated items to a community yard sale on May 18, 2013, thinking she was getting rid of things she no longer used or needed. Well, it turns out that one of the items she gave them - a denim jacket that sold for $20 - had a couple of extra surprises in the pockets. She forgot that she used the old denim jacket, which hung in the back of her closet, as a de-facto safe to keep valuables and money. Not only was there a pair of $18,000 diamond earrings, but there was also a $1500 ring that her husband had given her. Of course, she is devastated by the error, and is hoping that the stranger who purchased the jacket returns the valuable items. So far, she's had no luck.

 

8. Woman Loses 1400 British Pounds by Entering the Wrong Digit

 

It may seem like a small amount of money (@$2200 US), but it underscores a common problem in the banking industry. Inadvertent mistakes by people using online banking can lead to financial pain. In this particular case, a woman from South Wales attempted to move 100,000 Pounds from one Nationwide Bank account to another, and mistakenly typed in one wrong digit of her 8-digit account. When the money didn't show up a few days later, she contacted the bank and was eventually able to recover 98,600 of it, but 1,400 was deemed irretrievable because it would push the other customer into their overdraft, according to the Mail UK. The larger problem is exposed and discussed in a lengthy article, which estimates that millions of pounds are lost every year in similar mishaps. 

Bottom line: 

Be careful what you type when transferring your money.

New Norms for Credit Cards :Reserve Bank of India

All new debit and credit cards to be issued only for domestic usage unless international use is specifically sought by the customer.

Reserve Bank of India (RBI) vide Circular dated 28.02.2013 on “Security and Risk Mitigation Measures for Electronic Payment Transactions” has directed banks to put in place the following safety measures for Credit and Debit Card Transactions :

• All new debit and credit cards to be issued only for domestic usage unless international use is specifically sought by the customer. Such cards enabling international usage will have to be essentially EMV Chip and Pin enabled. (By June 30, 2013).

                                   Sample of EMV Chip and PIN enabled card

• Issuing banks should convert all existing Magstripe cards to EMV Chip card for all customers who have used their cards internationally at least once (for/through e-commerce/ATM/POS) (By June 30, 2013).

Backside of Existing Megastrip card(Sample)

• All the active Magstripe international cards issued by banks should have threshold limit for international usage. The threshold should be determined by the banks based on the risk profile of the customer and accepted by the customer (By June 30,2013).

• Banks should ensure that the terminals installed at the merchants for capturing card payments (including the double swipe terminals used) should be certified for PCI-DSS (Payment Card Industry – Data Security Standards) and PA-DSS (Payment Applications – Data Security Standards) (By June 30,2013).

• Bank should frame rules based on the transaction pattern of the usage of cards by the customers in coordination with the authorized card payment networks for arresting fraud (By June 30, 2013).

• Banks should ensure that all acquiring infrastructure that is currently operational on IP (internet protocol) based solutions are mandatorily made to go through PCI-DSS and PA-DSS certification. This should include acquirers, processors/aggregators and large merchants (By June 30, 2013).

• Banks should move towards real time fraud monitoring system at the earliest.

• Banks should provide easier methods (like SMS) for the customer to block his card and get a confirmation to that effect after blocking the card.

• Banks should move towards a system that facilitates implementation of additional facilitates implementation of additional factor of authentication for cards issued in India and used internationally (transactions acquired by banks located abroad).

After discussions with Banks, the RBI had issued the above guidelines vide Circular dated 28.02.2013 on “Security and Risk Mitigation Measures for Electronic Payment Transactions”.

Developments in Banking

1.Validity Period of Cheques. NEW RBI NORMS ! make life smoother for investors.

For years, the validity period of cheques, pay orders and demand drafts or bankers' cheque has been six months. This, however, is changed. Starting April 1 ,2012,  the time period to en cash cheque or DDs has been reduced to three months. In other words, the validity period for these instruments will three months instead of six months.

Validity of cheques: In a diktat issued earlier this month, the Reserve Bank of India said this move was intended to stop the misuse of the six-month validity period by 'some persons' who were circulating such instruments in the market like cash. "The Reserve Bank is satisfied that in public interest and in the interest of banking policy, it is necessary to reduce the period within which cheques/drafts/pay orders/banker's cheques are presented for payment from six months to three months from the date of such instrument," the notification said.

Through this measure, the banking regulator seeks to curb the practice of transferring a cheque (and thus, the proceeds of the instrument) from a person in whose favour it was originally issued to another, in return for a fee.

This apart, banks have also been asked to refrain from crediting the proceeds of an 'account payee cheque' to those other than the payee constituent (that is, the one to whom such a cheque is issued).

Source: The Economic Times

2. RBI cautions Public Not to respond to Phishing Mail sent in its Name

A press release from Reserve Bank of India has cautioned the banks and the  public about a phishing mail purported to have been sent by RBI. Please go  through the mail and take precautions as advised by RBI. It has come to the notice of the Reserve Bank of India that an email has been  sent in its name from mail id: Reserve Bank Of India < no-reply@rbi.com >  and signed by RBI, Security Team offering a 'new online security protection'  called  "Netsecured” to “reduce fraud and theft in various banking system …(and)… to enable all customer's online banking in all Indian Banks to get  protected and Secured.” The Reserve Bank cautions members of public that it has not developed any  such software; nor has it sent any such mail asking online banking customers  to update their account details to secure their online accounts. In fact, the  Reserve Bank does not have any mail id with extension @rbi.com Members of public receiving such mails should not open the attachment and/or  try to download the attachment on their computers. This is a phishing mail and  accessing the mail in any manner could result in identity theft. Press Release : 2012-13/634

3. RBI Extends CTS Cheque Deadline by 3 months:

As you are aware, RBI advised on 03.09.2012 that  all banks to arrange 
to issue only multi-city/payable at par CTS-2010 standard cheques not 
later than September 30, 2012 and to withdraw the non-CTS-2010 
Standard cheques in circulation before December 31, 2012 by creating customer awareness. Further, banks holding post-dated EMI cheques 
(received either on their own behalf or on behalf of their NBFC clients 
and others) were advised to ensure the replacement of non-CTS-2010 
Standard cheques with CTS-2010 standard cheques before 
December 31, 2012.

While most of the banks, it is reported, have confirmed that they are issuing only multi-city/payable at par CTS-2010 standard cheques at present, representations have been received by RBI from various stakeholders requesting for extension of the time beyond December 31, 2012 for withdrawal / replacement of non-CTS-2010 Standard cheques / post-dated EMI cheques with CTS-2010 standard cheques.

Taking into consideration these representations, it has been decided by the RBI to extend the time up to March 31, 2013 for banks to ensure withdrawal of non-CTS 2010 Standard cheques and replace them with CTS-2010 Standard cheques. 

However, it has been emphasised  that the residual non-CTS-2010 Standard cheques that get presented in the clearing system beyond this extended period will continue to be accepted for the clearing but will be cleared at less frequent intervals. 

The modalities, charges applicable if any, etc. are being discussed with stakeholders and a separate communication is likely to be issued by RBI  in this regard.

National Electronic Funds Transfer (NEFT)

Before the computerisation of banks, money was transferred from one account to another account in a different branch by way of Demand drafts,Mail Transfer and Telegraphic transfer.

Now all the banks are transferring money either by way of National Electronic Funds Transfer (NEFT) or by way of Real Time Gross Settlement system(RTGS). Banks have also provided these facilities directly to the customers through their |Internet Banking accounts thus enabling the customer to transfer the money to the customer of other banks.

In this post we will see how NEFT system functions in the banks:

Source: ABOUT NEFT SYSTEM

(A REQUEST: PLEASE GIVE YOUR COMMENTS IF THERE ARE ANY CHANGES/UPDATES ARE TO BE MADE IN THIS POSTING SO THAT I 
CAN CORRECT THE SAME)

Q.1. What is NEFT?

 National Electronic Funds Transfer (NEFT) is a nation-wide payment system facilitating one-to-one funds transfer. Under this Scheme,  individuals, firms and corporates can electronically transfer funds from any bank branch to any individual, firm or corporate having an account with any other bank branch in the country participating in the Scheme.

Q.2. Are all bank branches in the country part of the NEFT funds transfer network?

 List of bank-wise branches which are participating in NEFT is provided in the website of Reserve Bank of India at http://www.rbi.org.in/scripts/neft.aspx

Q.3. Who can transfer funds using NEFT?

 Individuals, firms or corporates maintaining accounts with a bank branch can transfer funds using NEFT. Even such individuals who do not have a bank account (walk-in customers) can also deposit cash at the NEFT-enabled branches with instructions to transfer funds using NEFT. However, such cash remittances will be restricted to a maximum of Rs.50,000/- per transaction.

Such customers have to furnish full details including complete address, telephone number, etc.NEFT, thus, facilitates originators or remitters to initiate funds transfer transactions even without having a bank account.

Q.4. Who can receive funds through the NEFT system?

 Individuals, firms or corporates maintaining accounts with a bank branch can receive funds through the NEFT system. It is, therefore, necessary for the beneficiary to have an account with the NEFT enabled destination bank branch in the country.

The NEFT system also facilitates one-waycross-border transfer of funds from India to Nepal. This is known as the Indo-Nepal Remittance Facility Scheme.

A remitter can transfer funds from any of the NEFT-enabled branches in to Nepal, irrespective of whether the beneficiary in Nepal maintains an account with a bank branch in Nepal or not. The beneficiary would receive funds in Nepalese Rupees. Further details on the Indo-Nepal Remittance Facility Scheme are available on the website of Reserve Bank of India at http://rbidocs.rbi.org.in/rdocs/content/pdfs/84489.pdf.

Q.5. Is there any limit on the amount that could be transferred using NEFT?

 No. There is no limit – either minimum or maximum – on the amount of funds that could be transferred using NEFT. However, maximum amount per transaction is limited to Rs.50,000/- for cash-based remittances and remittances to Nepal.

Q.7. Whether the system is centre specific or has any geographical restriction?

No. There is no restriction of centres or of any geographical area within the country. The NEFT system takes advantage of the core banking system in banks. Accordingly, the settlement of funds between originating and receiving banks takes places centrally at Mumbai, whereas the branches participating in NEFT can be located anywhere across the length and breadth of the country.

Q.6. What are the operating hours of NEFT?

Presently, NEFT operates in hourly batches - there are twelve settlements from 8 am to 7 pm on week days (Monday through Friday) and six settlements from 8 am to 1 pm on Saturdays.

Q.7. How does the NEFT system operate?

Step-1 : An individual / firm / corporate intending to originate  transfer of funds through NEFT has to fill an application form providing details of the beneficiary (like name of the beneficiary, name of the bank branch where the beneficiary has an account, IFSC of the beneficiary bank branch, account type and account number) and the amount to be remitted. The application form will be available at the originating bank branch.

The remitter authorizes his/her bank branch to debit his account and remit the specified amount to the beneficiary. Customers enjoying net banking facility offered by their bankers can also initiate the funds transfer request online. Some banks offer the NEFT facility even through the ATMs. Walk-in customers will, however, have to give their contact details (complete address and telephone number, etc.) to the branch. This will help the branch to refund the money to the customer in case credit could not be afforded to the beneficiary’s bank account or the transaction is rejected / returned for any reason.

Step-2 : The originating bank branch prepares a message and sends the message to its pooling centre (also called the NEFT Service Centre).

Step-3 : The pooling centre forwards the message to the NEFT Clearing Centre (operated by National Clearing Cell, Reserve Bank of India, Mumbai) to be included for the next available batch.

Step-4 : The Clearing Centre sorts the funds transfer transactions destination bank-wise and prepares accounting entries to receive funds from the originating banks (debit) and give the funds to the destination banks(credit). Thereafter, bank-wise remittance messages are forwarded to the destination banks through their pooling centre (NEFT Service Centre).

Step-5 : The destination banks receive the inward remittance messages from the Clearing Centre and pass on the credit to the beneficiary customers’ accounts.

Q.8. What is IFSC?

 IFSC or Indian Financial System Code is an alpha-numeric code that uniquely identifies a bank-branch participating in the NEFT system. This is an 11 digit code with the first 4 alpha characters representing the bank, and the last 6 characters representing the branch. The 5th character is 0 (zero). IFSC is used by the NEFT system to identify the originating / destination banks / branches and also to route the messages appropriately to the concerned banks / branches.

Q.9. How can the IFSC of a bank-branch be found?

 Bank-wise list of IFSCs is available with all the bank-branches participating in NEFT.List of bank-wise branches participating in NEFT and their IFSCs is available on the website of Reserve Bank of India athttp://www.rbi.org.in/Scripts/bs_viewcontent.aspx?Id=2009 . All the banks have also been advised to print the IFSC of the branch on cheques issued to their customers. For net banking customers many banks have enabled online search / pop-up of the IFSC of the destination bank branch.

Further, banks have also been advised to ensure that their branch staff provide necessary assistance to customers in filling out the required details, including IFSC details, in the NEFT application form, and also help in ensuring that there is no mismatch between the IFSC code and branch details of beneficiary branch as provided by the customer.

Q.10. What are the processing or service charges for NEFT transactions?

The structure of charges that can be levied on the customer for NEFT is given below:

a) Inward transactions at destination bank branches (for credit to beneficiary accounts)
– Free, no charges to be levied from beneficiaries

b) Outward transactions at originating bank branches – charges applicable for the remitter

-  For transactions up to Rs  10,000 : not exceeding Rs 2.50 (+ Service Tax)

- For transactions above Rs 10,000 up to Rs  1 lakh: not exceeding Rs 5 (+ Service Tax)

-  For transactions above Rs 1 lakh and up to Rs 2 lakhs: not exceeding Rs 15 (+ Service Tax)

-  For transactions above Rs 2 lakhs: not exceeding Rs 25 (+ Service Tax)

c) Charges applicable for transferring funds from India to Nepal using the NEFT system (under the Indo-Nepal Remittance Facility Scheme) is available on the website of RBI at http://rbi.org.in/scripts/FAQView.aspx?Id=67
With effect from 1st July 2011, originating banks are required to pay a nominal charge of 25 paise each per transaction to the clearing house as well as destination bank as service charge. However, these charges cannot be passed on to the customers by the banks.

Q.11. When can the beneficiary expect to get the credit to his bank account?

The beneficiary can expect to get credit for the first ten batches on week days (i.e., transactions from 8 am to 5 pm) and the first five batches on Saturdays (i.e., transactions from 8 am to 12 noon) on the same day. For transactions settled in the last two batches on week days (i.e., transactions settled in the 6 and 7 pm batches) and the last batch on Saturdays (i.e., transactions handled in the 1 pm batch) beneficiaries can expect to get credit either on the same day or on the next working day morning (depending on the type of facility enjoyed by the beneficiary with his bank).

Q.12. Who should be contacted in case of non-credit or delay in credit to the beneficiary account?

 In case of non-credit or delay in credit to the beneficiary account, the NEFT Customer Facilitation Centre (CFC) of the respective bank can be contacted (the remitter can contact his bank’s CFC; the beneficiary may contact the CFC of his bank). Details of NEFT Customer Facilitation Centres of banks are available on the websites of the respective banks. The details are also available on the website of Reserve Bank of India at http://www.rbi.org.in/Scripts/bs_viewcontent.aspx?Id=2070 .

If the issue is not resolved satisfactorily, the NEFT Help Desk (or Customer Facilitation Centre of Reserve Bank of India) at National Clearing Cell, Reserve Bank of India, Mumbai may be contacted through e-mail or by addressing correspondence to the General Manager, Reserve Bank of India, National Clearing Centre, First Floor, Free Press House, Nariman Point, Mumbai – 400 021.

Q.13. What will happen if credit is not afforded to the account of the beneficiary?

If it is not possible to afford credit to the account of the beneficiary for whatever reason, destination banks are required to return the transaction (to the originating branch) within two hours of completion of the batch in which the transaction was processed.

For example, if a customer submits a fund transfer request at 12.05 p.m. to a NEFT-enabled branch, the branch in turn forwards the message through its pooling centre to the NEFT Clearing Centre for processing in the immediately available batch which (say) is the 1.00 pm batch. If the destination bank is unable to afford the credit to the beneficiary for any reason, it has to return the transaction to the originating bank, not later than in the 3.00 pm batch. On receiving such a returned transaction, the originating bank has to credit the amount back to account of the originating customer. To conclude, for all uncredited transactions, customers can reasonably expect the funds to be received back by them in around 3 to 4 hours time.

Q.14. Can NEFT be used to transfer funds from / to NRE and NRO accounts?

NEFT can be used to transfer funds from or to NRE and NRO accounts in the country. This, however, is subject to the adherence of the provisions of the Foreign Exchange Management Act, 2000 (FEMA) and Wire Transfer Guidelines.

Q.15. Can remittances be sent abroad using NEFT?

No. However, a facility is available to send outward remittances to Nepal under the Indo-Nepal Remittance Facility Scheme.

Q.16. What are the other transactions that could be initiated using NEFT?

 Besides personal funds transfer, the NEFT system can also be used for a variety of transaction including payment of credit card dues to the card issuing banks. It is necessary to quote the IFSC of the beneficiary card issuing bank to initiate the bill payment transactions using NEFT.

Q.17. Can a transaction be originated to draw (receive) funds from another account?

No. NEFT is a credit-push system i.e., transactions can be originated only to transfer / remit funds to a beneficiary.

Q.18. Would the remitter receive an acknowledgement once the funds are transferred to the account of the beneficiary?

Yes. In case of successful credit to the beneficiary's account, the bank which had originated the transaction is expected to send a confirmation to the originating customer (through SMS or e-mail) advising of the credit as also mentioning the date and time of credit. For the purpose, remitters need to provide their mobile number / e-mail-id to the branch at the time of originating the transaction.

Q.19. Is there a way for the remitter to track a transaction in NEFT?

Yes, the remitter can track the NEFT transaction through the originating bank branch or its CFC using the unique transaction reference number provided at the time of initiating the funds transfer. It is possible for the originating bank branch to keep track and be aware of the status of the NEFT transaction at all times.

Q.20. What are the pre-requisites for originating a NEFT transaction?

 Following are the pre-requisites for putting through a funds transfer transaction using NEFT –

• Originating and destination bank branches should be part of the NEFT network
• Beneficiary details such as beneficiary name, account number and account type, name and IFSC of the beneficiary bank branch should be available with the remitter
• For net banking customers, some banks provide the facility to automatically pop-up the IFSC once name of the destination bank and branch is highlighted / chosen /   indicated / keyed in.

Q.21.  What are the benefits of using NEFT?

 NEFT offers many advantages over the other modes of funds transfer:

• The remitter need not send the physical cheque or Demand Draft to the beneficiary.
• The beneficiary need not visit his / her bank for depositing the paper instruments.
• The beneficiary need not be apprehensive of loss / theft of physical instruments or the likelihood of fraudulent encashment thereof.
• Cost effective.
• Credit confirmation of the remittances sent by SMS or email.
• Remitter can initiate the remittances from his home / place of work using the internet banking also.
• Near real time transfer of the funds to the beneficiary account in a secure manner.
  
  
  

Recent Developments in Banking

In this post I have covered the details of various recent developments  related to banking. I hope that the same will be useful for the staff of banks who are appearing for the tests and interviews for their promotions:

1.Current Rates as on 2.11.2012:

a)Policy Rates:

i)Bank Rate:                  9%

(Bank Rate is the rate at which  RBI  allows finance to commercial banks. Bank Rate is a tool, which central bank  uses for short-term purposes. Any upward revision in Bank Rate by central bank is an indication that banks should also increase    deposit rates  as well as Base Rate/ Benchmark Prime Lending Rate(BPLR).  Thus any revision in the Bank rate indicates that it is likely that interest rates on your deposits are likely to either go up or go down,  and it can also indicate  an increase or decrease in your EMI.)

ii)Repo Rate:                  8%

( Repo Rate: Whenever the banks have any shortage of funds they can borrow it from RBI.  Repo rate is  the rate at which our banks borrow rupees from RBI. A reduction in  the repo rate will help banks to get money at a cheaper rate.  When the repo rate increases borrowing from RBI becomes more expensive.)

iii)Reverse Repo Rate:     7%

Reverse Repo rate is the rate at which Reserve Bank of India (RBI) borrows money from banks. Banks are always ready to lend money to RBI since their money are in safe hands with a good interest. An increase in Reverse repo rate can cause the banks to transfer more funds to RBI due to this attractive interest rates. It can cause the money to be drawn out of the banking system. 

b)Reserve Ratios:

i)CRR                         4.50%

(CRR(Cash Reserve Ratio):Cash reserve Ratio (CRR) is the amount of Cash(liquid cash like gold) that    the banks have to keep with RBI. This Ratio is basically to secure solvency of the bank and to drain out the excessive money from the banks. If RBI decides to increase the percent of this, the available amount with the banks comes down and if RBI reduce the CRR then available amount with Banks increased and they are able to lend more.)

ii)SLR                        23.00%

(CRR(Cash Reserve Ratio):Cash reserve Ratio (CRR) is the amount of Cash(liquid cash like gold) that    the banks have to keep with RBI. This Ratio is basically to secure solvency of the bank and to drain out the excessive money from the banks. If RBI decides to increase the percent of this, the available amount with the banks comes down and if RBI reduce the CRR then available amount with Banks increased and they are able to lend more.)

 ( Ref my post on  Monetary Tools used by RBI to control Inflation with the following link to know more details: http://svsaibaba.blogspot.in/2011/09/monetary-tools-used-by-rbi-to-control.html )

2.RBI clarifies on penalty clause for 'survivors'

The Reserve Bank of India has adivsed banks to make sure to incorporate the "either or survivor" or "former or survivor" clause in their account opening forms.

RBI had advised that in case joint depositors of term/fixed deposits with "Either or Survivor" or "Former or Survivor" mandate intend to allow premature withdrawal of their deposits by one of the joint depositors on the death of the other.

RBI also clarified that such premature withdrawal would not attract any penal charge on survivor.

The joint deposit holders may be permitted to give the mandate either at the time of placing fixed deposit or anytime subsequently during the term/tenure of the deposit. If such a mandate is obtained, banks can allow premature withdrawal of term/fixed deposits by the surviving depositor without seeking the concurrence of the legal heirs of the deceased joint deposit holder.

RBI has also asked banks to inform their existing along with future term deposit holders about the availability of such an option.

The Reserve Bank of India (RBI) has also advised regional rural and co-operative banks to modify Fixed Deposit account opening forms to allow premature withdrawal of FD on death of one of the joint account holders without any penalty. Under the modified norms, it will be easier for the surviving joint account holders to go for premature withdrawal of FD in the event of death of the other. 

As per the RBI notification, banks will have to incorporate a clause in the FD form to give option of premature withdrawal by survivor in case of death of the other joint account holder.

3. Deduction on Interest on Saving Account – 80TTA

Individuals and HUFs can now claim deduction on Interest on saving account from 1st April, 2013 u/s 80TTA. Section 80TTA has been newly inserted to provide deduction in respect of interest on deposits in Savings Accounts held with Banks, Post office and Cooperative Banks.

Eligible Assessee

Deduction on Interest on saving account will be allowed only to Individuals and HUF’s (Hindu Undivided Family).

Section 80TTA deduction shall not be allowed to any Partnership firm, Association of Persons, Company or a body of individuals.

Qualifying – Saving Account

Deduction in respect of Interest on saving account with any of the following will qualify:

    Bank or banking company;
    Co-operative Society engaged in carrying on the business of banking, including a co-operative land mortgage bank or co-operative land development bank,
    Post office Saving Account.

Other Relevant Points

Deposit in other scheme of Post office or time deposit or term deposit or fixed deposits will not be allowed.

Moreover, where the interest on saving account is derived from any deposit in a savings account held by, or on behalf of, a firm, an association of persons or a body of individuals, no deduction shall be allowed in respect of such income in computing the total income of any partner of the firm or any member of the association or body.

Quantum of Deduction

Deduction shall be allowed upto Rs. 10000 in aggregate.

Availability

Deduction will be available to an assessee, being an individual and HUF’s from 1st April, 2013. In other words, deduction on Interest on saving account will apply from financial year 2012-2013 (Assessment year 2013-2014) and subsequent years.

4. ISSUE OF CHEQUES WITH UNIFORM FEATURES CONFORMING TO CHEQUE TRUNCATION SYSTEM (CTS)2010:

The Reserve Bank of India (RBI)  directed all banks to issue cheques with uniform features conforming to Cheque Truncation System (CTS) 2010 standard by the end of September 2012.

The homogeneity in security features act as deterrent against frauds, and the fixed field placement specifications facilitate straight-through-processing at drawee banks’ end through the use of optical or image character recognition technology, RBI said in a notification.

Adherence to CTS-2010 standards has inherent advantages as the security features in cheque forms help the presenting banks to identify the genuineness of the drawee banks’ instruments while handling them in the image based scenario, it said.

To ensure the time-bound migration to CTS-2010 standard cheque formats, all banks are advised to arrange only “multi-city or payable at par CTS-2010 standard cheques not later than September 30, 2012,” it said.

“Arrange to withdraw the non-CTS-2010 standard cheques in circulation before December 31, 2012 by creating awareness among customers through SMS alerts, letters, display boards in branches/ATMs, log-on message in internet banking, notification on the web-site etc,” it said.

The introduction of new cheque standards ‘CTS 2010’ was warranted on account of several developments in the cheque clearing namely growing use of multi-city and payable-at-par cheques at any branch of a bank, increasing popularity of speed clearing for local processing of outstation cheques and implementation of grid based CTS for image-based cheque processing etc., it said.

Will your Cheque Book be valid after 31^st December, 2012?

As per RBI guidelines, there have been certain changes made to the cheques issued by the Bank. However, these changes are available only in cheque books issued after August 2011. If you have obtained the cheque book prior to this, the cheques will not be valid after December 31, 2012.  

If the cheques you currently hold have the following features, they will be valid after the given date.

• "Please sign above" is mentioned on cheque leaf on the lower right  hand side.
• A wave like design is embossed on the left-hand side of Cheque leaf   

Below is the new sample cheque format from HDFC Bank  

Additionally, any post-dated cheques issued by you and due after December 31, 2012 will need to be replaced by the fresh cheques meeting the above mentioned guidelines. 

Please contact your bank branch for new cheque book.

5. DISABLING OF ATM CASH RETRACTION:

What is ‘Cash Retraction’?

‘Cash Retraction’ means if the cash notes are not collected from ATM
slot within specified time, cash notes are taken back by the ATM.

The banks have done away with the cash retraction system in ATMs. The systemwas withdrawn  after the Reserve Bank of India (RBI) agreed to National Payments Corporation of India's proposal for removing the feature from all ATMs to deal with the increasing number of fraudulent claims about non-receipt of cash. 

Banks have posted messages on their websites that the system has been disabled. The step has been taken to prevent the misuse of the system as RBI has received complaints about people trying to defraud banks by holding on to some withdrawn currency notes in ATMs and then claiming non-receipt of cash after the machine takes back the rest. 

Now, every time you visit an ATM for cash withdrawal; please remember the following:
Always collect all your cash notes while doing a cash withdrawal transaction  

 If all cash notes are not collected, cash will not be taken back by the ATM machine and will remain there till the time the cash is not collected

Count all your notes before leaving the ATM site

6. Post Offices to have ATM facility soon

On the occasion of World Post Day , the Department of Post announced a proposal to install ATMs at several post offices in the state. “The Banking Services are available but this will enable anywhere, anytime banking. It will give easy access to electronic clearing services and fund transfer. 519 Post offices have been identified for core Banking Services. 1403 Post offices have been covered under project arrow. Out of these,141 Post offices have been covered under look & feel.” said Shri A.K. Sharma, Chief Postmaster General of Maharashtra and Goa.

World Post Day marks the institution of the Universal Postal Union way back in 1847 in Bern in Switzerland. In India, the dept. has come a long way from the time it merely courier letters and parcels to multi –utility facilitator of products and services. Sharma added there were plans to network all the post offices through computers. “We are partnering with firms like TCS for training staff, Infosys for full service integration and Sify will handle our network integration.” he said.

(Source:http://egov.eletsonline.com/2012/10/post-offices-to-have-atm-facility-soon/)

7. RBI sets up committee for sustainable financial inclusion

RBI has constituted a high level Financial Inclusion Advisory Committee (FIAC) to spearhead the efforts towards greater financial inclusion. The collective expertise and experience of the members of the committee will explore issues such as developing viable and sustainable banking services delivery models focusing on accessible and affordable financial services, developing products and processes for rural as well as urban consumers presently outside the banking network and suggest appropriate regulatory framework to ensure that financial inclusion and financial stability move in tandem.

The Committee will be chaired by Dr. K.C. Chakrabarty, Deputy Governor, Reserve Bank of India and will comprise of members of board of directors of RBI, professors from eminent institutions, and senior level officials from UIDAI and banks. Executive Director in-charge of Rural Planning and Credit Department, Reserve Bank of India will be the convenor of the committee.

Ensuring accessible and affordable financial services in all 6 lakh villages in India is a herculean task and given the enormity of the task, a lot of ground still needs to be covered.  This calls for a partnership of all the stakeholders – RBI, other sectoral regulators like Securities and Exchange Board of India. While the regulators and the Government of India are already part of the financial inclusion project, a need was felt to engage the members from the civil society/Non-Governmental Organisations and others for a sound and purposeful collaboration.

The committee, if necessary, would call other market players like Corporate Business Correspondents, Technology Vendors etc., as special invitees to the meetings. Since the financial inclusion model selected in India is primarily bank-led, the committee may also invite the Chairperson/Managing Directors of banks to its meetings to gather the perspective of the banks.

(Source:http://egov.eletsonline.com/2012/10/rbi-sets-up-committee-for-sustainable-financial-inclusion/)