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Investing in <keyword id="130529" type="UNKNOWN" weightage="100" keywordseo="Infrastructure-bonds">infrastructure bonds</keyword> has become even more lucrative now. The Reserve Bank of India (<keyword id="30067" type="ORGANIZATION" weightage="100" keywordseo="RBI">RBI</keyword>) has said that now banks can give loans up to Rs 10 lakh per borrower against investment in long-term infrastructure bonds. 
 
The idea behind this move is to provide liquidity to retail investors. "In order to provide liquidity to retail investors in such bonds, it has been decided that banks can extend loans to individuals against long-term bonds issued by them...," RBI said. 
 
The tenure of such loans should be within the maturity period of the bonds. One must also note, that banks are not permitted to lend against bonds issued by other banks. 
 
According to banking sector experts, there is no clarity on how this measure will boost increase in loans in the near future. It is just another safe and secure option available for an investor to get a loan. 
 
As of now, banks do lend money against fixed deposits.

RBI Allows Banks To Lend Money Against Infra Bonds

Following reports of frauds at <keyword id="6359442" type="CITY" weightage="60" keywordseo="Dena-Bank">Dena Bank</keyword> and Oriental Bank of Commerce, the Finance Ministry has asked public sector banks to tighten norms for high-value fixed deposits (FD). As per preliminary forensic audit report, frauds worth Rs 436 crore were committed in these banks. 
 Banks have been asked to categorise FDs on the basis of their value. Apart from the Finance Ministry, the Reserve Bank of India (<keyword id="30067" type="ORGANIZATION" weightage="80" keywordseo="RBI">RBI</keyword>) too has asked the banks to tighten lending regulations in order to prevent borrowers from opening multiple current accounts outside their consortium banks. 
 Kingfisher Airlines had allegedly diverted funds by opening a current account in <keyword id="6357149" type="CITY" weightage="60" keywordseo="HDFC-bank">HDFC Bank</keyword>, where it had a balance of Rs 7,50,00,000 crore. This fact was concealed from the consortium of lenders headed by the State Bank of India, having a debt of Rs 6,521 crore to Kingfisher Airlines. 
 
A few days ago, the Finance Ministry had ordered forensic audit into some non-performing accounts of UCO Bank to probe alleged irregularities in sanctioning of loans.

Govt Asks PSU
Banks To Tighten High-value Fixed Deposit Norms

Managing liquidity is an important aspect of personal <keyword id="25455" type="ORGANIZATION" weightage="100" keywordseo="finance">finance</keyword> planning. Even individuals with good investment portfolios find it difficult to manage liquidity. A sudden requirement of cash can push one into a situation where he/she may have to sell assets, sometimes at a discount to fair value. However, if smartly used, the traditional bank fixed deposits can come to your rescue. Banks offer personal loans against bank fixed deposits and you can raise short-term money without breaking your fixed deposits. 
 Another advantage that the borrower enjoys is the low <keyword id="37018" type="UNKNOWN" weightage="100" keywordseo="interest-rate">interest rate</keyword>, compared to other <keyword id="180660" type="UNKNOWN" weightage="100" keywordseo="personal-loan">personal loan</keyword>s. Most banks offer personal loans at an interest rate ranging between 16% and 24%. But a personal loan taken against a <keyword id="74427" type="UNKNOWN" weightage="100" keywordseo="fixed-deposit">fixed deposit</keyword> ensures that you pay just 1% more than the rate of interest payable by the bank on the fixed deposit. 
 
For example, if a bank pays 9% interest on a three-year fixed deposit, the rate of interest payable on the personal loan raised against it will be 10%. This saves a lot of money that you would have paid as interest, had it been a traditional personal loan, backed by no security. 
 
Personal loan against a bank fixed deposit is easy to obtain and the process generally takes less than one day. An individual has to submit the application form duly filled, along with fixed deposit receipts and other documents, such as pledge/lien letter and overdraft agreement as notified by the bank. There is no prepayment penalty charged by the bank on the repayment of personal loans against fixed deposit. Banks do charge a small processing fee while providing this loan. But if you have a long-standing relationship with the bank, it may choose to waive half the fee. 
 
Banks generally offer 90% of the value of the fixed deposit. For instance, if you have made a fixed deposit with a bank just one month ago, the bank will be offering you a personal loan to the extent of 90% of the amount you have invested. If the fixed deposit has already run for two years, the bank will be comfortable to lend you a bit more money than the amount you invested as some interest has been accrued on it over the past two years. Simply put, the amount of loan offered against a fixed deposit will be closer to 90% of the value of the fixed deposit. If the borrower fails to service the loan, the bank has the right to foreclose the fixed deposit to recover the money it has lent. This also means that the tenure of the personal loan given against the bank’s fixed deposit cannot exceed the residual tenure of the fixed deposit. 
 
Banks also offer overdraft facility against such fixed deposits. This enables borrowers to have access to liquidity. A borrower can use funds for a short period of time and repay the money much before the due date. In this way, he pays interest only for the time he has availed the cash from the bank. 
 
For example, an individual has a fixed deposit of Rs 1 lakh. The bank’s approved credit limit is Rs 90,000 against the FD and the tenure is 15 months. If the person draws Rs 50,000 on the 1st of the month and then repays the money on 17th of the same month, he is supposed to pay the interest on Rs 50,000 availed for 17 days. 
 However, when you take a loan against a fixed deposit, it should be free from lien or encumbrance, and the deposit should not be in a minor’s name. If this deposit is made under joint names, say a husband and a wife, all holders of the deposit have to execute the loan documents. The liability to repay the loan will lie with all holders of the deposit. The deposit holders will continue to receive interest on the underlying deposit. However, they need to service the <keyword id="6357050" type="COMPANY" weightage="100" keywordseo="EMI">EMI</keyword> on the loan against the deposit. 
 
A personal loan against fixed deposit can help you in times of liquidity crunch. But you should be looking at it as a means to raise short-term money. If you go overboard with a personal loan against fixed deposit and cannot repay on time, you stand to lose your bank fixed deposit as the bank forecloses that fixed deposit to recover the money it has lent. Also, it shows in your credit report, popularly known as the CIBIL report. Such default can pull your CIBIL scores down. Therefore, when you are raising personal loan against bank fixed deposit, do it responsibly. 
 
About the author: Rajiv Raj is the Director and Co-founder of <a href="http://www.creditvidya.com">www.creditvidya.com</a>.

Looking For Quick Cash? Get A Personal Loan Against Fixed Deposit

As the government is set to announce a slew of reforms, one of them may not attract you much. 
 The government plans to lower down <keyword id="6371181" type="UNKNOWN" weightage="20" keywordseo="interest-rates">interest rates</keyword> on saving products like <keyword id="76579" type="CITY" weightage="20" keywordseo="PPF">PPF</keyword>, National <keyword id="25450" type="UNKNOWN" weightage="20" keywordseo="savings">Savings</keyword> Certificate (NSC) and the bank FDs may also attract lower interest. 
 
The move by the finance ministry will impact people who take maturity period of less than five years. However, it is speculated that women and senior citizens will b exempted with savings plans like Sukanya Samriddhi Yojana. 
 Meanwhile, the <keyword id="30067" type="ORGANIZATION" weightage="20" keywordseo="RBI">RBI</keyword> wants the banks to follow suit and follow the small savings rate cut with lower fixed deposit rates. 
 RBI says the PPF and other plans gave higher returns as compared to <keyword id="6377620" type="UNKNOWN" weightage="20" keywordseo="fixed-deposits">fixed deposits</keyword>. This has, in turn, forced banks to maintain higher deposit rates.

Soon, you may not get return benefits on your savings

The Congress on Wednesday said the <keyword id="19900449" type="General" weightage="20" keywordseo="government" source="keywords">government</keyword>'s proposal of giving individuals the option to choose between two tax rates for long-term capital gains (<keyword id="6357448" type="General" weightage="20" keywordseo="LTCG" source="Orion">LTCG</keyword>) tax on properties is not enough. It should also allow <keyword id="21006654" type="General" weightage="100" keywordseo="indexation-benefits" source="keywords">indexation benefits</keyword> for other forms of <keyword id="20044873" type="General" weightage="20" keywordseo="savings" source="keywords">savings</keyword> such as <keyword id="19905382" type="General" weightage="20" keywordseo="stocks" source="keywords">stocks</keyword> and <keyword id="19975805" type="General" weightage="20" keywordseo="fixed-deposits" source="keywords">fixed deposits</keyword>. Professionals' Congress Chairman Praveen Chakravarty accused the government of "betraying" the middle and salaried class in the Union Budget through the removal of indexation and higher taxes on their savings and <keyword id="22703183" type="General" weightage="20" keywordseo="investment-gains" source="keywords">investment gains</keyword>. "On 23rd July, Finance Minister <keyword id="19916618" type="General" weightage="20" keywordseo="nirmala-sitharaman" source="keywords">Nirmala Sitharaman</keyword> presented the government's budget in Parliament. We welcomed certain aspects but we strongly opposed many parts of the budget. We welcomed the fact that the FM took some ideas from the Congress party's manifesto such as the employment linked incentive (ELI) scheme, the Apprenticeship Act and removing Angel tax," Chakravarty said at a press conference at the AICC headquarters here. Among other things, we strongly opposed what the finance did to the middle class and salaried professionals, he said. Leader of the Opposition Rahul Gandhi in his response to the Budget in Parliament categorically said that this was a "betrayal of the middle class" through removal of indexation and higher taxes on their savings and investment gains, Chakravarty pointed out. "He (Gandhi) had promised to fight for the middle class on this issue. This issue affected nearly 7 crore Indians who filed income taxes, owned or aspire to own a home and invest their savings. In this budget, effectively, through removal of indexation and increase in capital gains taxes, the taxes of salaried professionals through investment gains went up dramatically," he said. Already, the middle class and the salaried professionals are bearing the brunt of taxation under the Modi government because for the first time in India, total income taxes paid by middle class individuals are higher than taxes paid by rich corporates, Chakravarty said. There were huge protests on social media and in business events in cities like Mumbai where professionals came out spontaneously to protest, he said. Chakravarty said the <keyword id="22703184" type="General" weightage="20" keywordseo="All-India-Professionals-Congress" source="keywords" meta.keywordsubtype="org" meta.entityname="All India Professionals' Congress" meta.hostid="261" meta.entityid="All India Professionals' Congress">All India Professionals' Congress</keyword> and the Congress Party launched a campaign to 'Bring Back Indexation' with a petition asking people to sign it. "We had nearly 12,000 people who signed the petition in just one day since its launch. Yesterday, the government of India announced a rollback of indexation of property gains by giving individuals the option to continue with indexation benefits. We welcome this. This is a victory to the 7 crore people that file income tax," he said. "But this is not enough. We urge the government to allow indexation benefits for other forms of savings too such as stocks, debt, fixed deposits and so on," Chakravarty asserted. More importantly, this is a testament to middle class power and the power of democracy, he said. "When professionals come together and raise their voice, it will be heard. This is also proof of what a strong Opposition and a concerted and united effort can achieve for the people of India. The AIPC will continue to raise issues that impact the middle class working professionals," Chakravarty said. His remarks come a day after the government proposed significant relief for individuals who bought houses before July 23, 2024, by giving them the option to choose between two tax rates for long-term capital gains (LTCG) tax. The Budget 2024-25 had proposed to lower the LTCG from 20% to 12.5% but removed the indexation benefits. The new rates have come into effect from July 23, 2024. The indexation benefit allowed the taxpayers to compute gains arising out of the sale of capital assets after adjusting for inflation. The tax experts had said that the proposed changes in the Budget would raise the LTCG tax burden. As per the amendments to Finance Bill, 2024, circulated to the Lok Sabha members on Tuesday, individuals or HuF who bought houses before July 23, 2024, can compute his/her taxes under the new scheme (@12.5% without indexation) and old scheme (@20% with indexation) and pay such tax which is lower of the two. After the Budget presentation, the Income Tax department said that 'substantial tax savings' are expected for a vast majority of taxpayers due to a reduction in the long-term capital gains tax (LTCG) rate in the real estate sector. As per the changes brought in the 2024-25 Budget, the government has retained the indexation benefit for the taxpayers on properties bought or inherited before 2001.

Allow indexation benefits for savings such as stocks, fixed deposits: Cong to govt

<ul><li>Two big financial goals – medical necessities and retirement pension – are taken care of to a large extent. </li><li>Systematic <keyword id="6355120" type="General" weightage="20" keywordseo="investment" source="Orion">investment</keyword> plans (SIPs) are an ideal investment option due to regular monthly income. </li><li>Buying property can be a good long-term investment, especially given the housing benefits and loans available to <keyword id="462296" type="General" weightage="20" keywordseo="defence-personnel" source="Orion">defence personnel</keyword>. </li></ul>All of us go to bed at night knowing that the men at our borders are there to protect us. But the lives of defence personnel are different, not only when it comes to their jobs, but also to their finances. First, they might be posted at extremely remote locations where it is very difficult to get financial advice or access to banking and investment products. Also, the demands of their career are such that it relegates financial planning low down in their to-do list. “Being a government servant, two big financial goals of medical necessities and retirement pension are taken care of to a large extent. But then there are many more requirements of life which need careful planning,” says Col. Sanjeev Govila (Retd), a SEBI Registered Investment Advisor (RIA), and CEO, Hum Fauji Initiatives, a financial planning firm. Children’s graduation and post-graduation, their marriages, purchase of a house when they’re close to retirement, good vacations post-retirement, change of car, charity, indulging in passions which may need money, etc are likely financial goals which need to be carefully planned for. We take a look at five investment options defence personnel may consider. <cmsannotation type="cmsannotation" annotationid="Fixed deposits" comment="Subhead" text="Fixed deposits"><keyword id="6377620" type="General" weightage="20" keywordseo="fixed-deposits" source="Orion">Fixed deposits</keyword></cmsannotation>: Fixed deposits are a good investment choice for defence personnel due to their safety and simplicity. They offer guaranteed returns, minimising risks associated with market fluctuations. For military personnel with unpredictable schedules, FDs provide flexibility in terms of tenures and can be easily managed from anywhere. Moreover, the guaranteed interest earnings add to financial stability, making it a good choice for long-term planning and security, which matches the disciplined and secure aspects of military life. <cmsannotation type="cmsannotation" annotationid="Equity investments" comment="Subhead" text="Equity investments">Equity investments</cmsannotation>: Defence personnel, like any other citizen, are allowed to invest in stocks / <keyword id="6357979" type="General" weightage="20" keywordseo="mutual-funds" source="Orion">mutual funds</keyword> or any other investment products. “However, they might have certain restrictions, especially officers holding sensitive positions. Such individuals might need to inform their respective cadres about their investments to avoid conflicts of interest,” says Bhuvanaa Shreeram, co-founder and head of financial planning, House of Alpha, a financial planning firm. When it comes to equity, the best suited investment option is mutual funds. “Systematic investment plans (SIPs) are ideally suited due to regular monthly income. However, thorough research, long-term outlook and regular monitoring is important,” says Govila. <cmsannotation type="cmsannotation" annotationid="Sukanya Samriddhi Yojana (SSY)" comment="Subhead" text="Sukanya Samriddhi Yojana (SSY)">Sukanya Samriddhi Yojana (SSY)</cmsannotation>: Sukanya Samriddhi Yojana is another investment option military personnel can consider if they have a girl child. It provides a secure and tax-saving avenue for their daughters' future. SSY offers an attractive interest rate, along with tax deductions under Section 80C of the Income Tax Act. For defence personnel frequently posted to remote areas, SSY can be conveniently managed online, ensuring consistent savings for their daughters' education and marriage. Its assured returns, safety, and tax benefits make it an appealing option, aligning with their commitment to secure their family's financial well-being. <cmsannotation type="cmsannotation" annotationid="Real Estate" comment="Subhead" text="Real Estate">Real Estate</cmsannotation>: “Buying property can be a good long-term investment, especially given the housing benefits and loans available to defence personnel. Although while in service they will be provided a place to stay, once they retire they will need a comfortable house to live in,” says Shreeram. “Start saving for a house early through SIPs in mutual funds and buy a house around 50 years of age when plans to finally settle down are concrete. No need for a second house,” says Govila. <cmsannotation type="cmsannotation" annotationid="Gold" comment="Subhead" text="Gold">Gold</cmsannotation>: Gold is a good investment choice for defence personnel due to its stability, liquidity, and security. It acts as a hedge against economic uncertainties, offering protection against inflation and currency fluctuations. Gold investments, such as Sovereign Gold Bonds (SGBs) and Gold Exchange-Traded Funds (ETFs), provide the convenience of electronic holdings and easy liquidity, aligning with the mobile lifestyle of military personnel. <keyword id="3790" type="General" weightage="20" keywordseo="armed-forces" source="Orion">Armed forces</keyword> personnel experience unique service conditions, and their financial situations can vary significantly. Nevertheless, the fundamental principles of financial planning and investment are applicable to them. With careful planning and disciplined execution, there's no reason they cannot achieve a financially secure and dignified life.

You Searched For "fixed deposits" and got 6 results

RBI Allows Banks To Lend Money Against Infra Bonds

BI India Bureau

Govt Asks PSU Banks To Tighten High-value Fixed Deposit Norms

BI India Bureau

Looking For Quick Cash? Get A Personal Loan Against Fixed Deposit

Rajiv Raj

Soon, you may not get return benefits on your savings

BI India Bureau

Allow indexation benefits for savings such as stocks, fixed deposits: Cong to govt

PTI

Five investment options for defence personnel

Anagh Pal

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