Banks not to credit "account payee" cheque proceeds to third party

In a circular issued on 22nd January 2014 the RBI has strictly prohibited the banks from crediting  'account payee' cheques to the account of any person other than the payee named therein. RBI reiterated its previous circulars and instructed that banks should strictly collect ‘account payee’ cheques only for their payee constituents.

Banks may, however, consider collecting account payee cheques drawn for an amount not exceeding Rs.50,000/- to the account of their customers who are co-operative credit societies, if the payees of such cheques are the constituents of such co-operative credit societies

Bank notes issued prior to 2005 will be withdrawn from 31st March 2014

The Reserve Bank of India has today (22nd January 2014) advised that after March 31, 2014, it will completely withdraw from circulation all banknotes issued prior to 2005. From April 1, 2014, the public will be required to approach banks for exchanging these notes. Banks will provide exchange facility for these notes until further communication. The Reserve Bank further stated that public can easily identify the notes to be withdrawn as the notes issued before 2005 do not have on them the year of printing on the reverse side.

The Reserve Bank has also clarified that the notes issued before 2005 will continue to be legal tender. This would mean that banks are required to exchange the notes for their customers as well as for non-customers. From July 01, 2014, however, to exchange more than 10 pieces of `500 and `1000 notes, non-customers will have to furnish proof of identity and residence to the bank branch in which she/he wants to exchange the notes.

The Reserve Bank has appealed to the public not to panic. They are requested to actively co-operate in the withdrawal process.

Virus - Beware

cyber security sleuths have detected a 'black' private information stealing virus in the Indian online banking transactions space and have alerted consumers who swipe debit or credit cards at shopping counters to make payments.

The 'severely' spreading virus of the Trojan family has been detected conducting its clandestine operations at the point of sale counters placed at retail terminals after the RBI made it mandatory in December last year for debit cards holders to punch in their PIN every time they make a purchase.

CERSAI to expand the scope of cover

Banks and lending institutions may soon be required to file with a central registry all information on loans sanctioned for gold jewellery, plant and machinery, corporate brands and logos. A legal working group set up by CERSAI and International Finance Corporation, under the chairmanship of M. R. Umarji, Chief Legal Advisor, Indian Banks’ Association, has recommended that the scope of CERSAI be expanded to cover movable assets, tangibles and intangibles. CERSAI (Central Registry of Securitisation Asset Reconstruction and Security Interest of India), a state-owned entity, currently operates a central registry with which information on all equitable mortgages is filed by lending institutions.

Court order puts spoke in banks’ loan recovery process in non-metros

Non-performing assets are mounting but our hands are tied, say bankers in non-metropolitan cities, pointing to a recent observation made by the Madurai Bench of the Madras High Court. A Bench observed that secured creditors in metropolitan areas could approach either the Chief Metropolitan Magistrate or District Magistrate for relief under the SARFAESI Act.

 

Before proceeding further on this, here is a look at how the NPAs in banks are handled. Often, banks try to settle NPA cases out of court. If that doesn’t work, the banker issues a possession notice in newspapers that is mandated under Section 13 (4) of the Act, in order to initiate recovery proceedings. Then the banker has to wait for 30 days for the party to come to settle the dues. If there is no response, the bank can initiate legal possession under Section 14 (this Section deals with persons who are eligible to take security possessions). The crux of the observation lies here.

 

‘Banks can keep loan security for other liabilities’

The Kerala High Court has ruled that a bank is entitled to retain security, including gold ornaments deposited for taking a loan, even after clearing the same, if the borrower is yet to repay another loan. Justice V. Chithambaresh ruled that a bank had a general lien over all forms of security, including gold ornaments deposited by the borrower, for the entire outstanding balance amount due to the bank. The court made the ruling while disposing of a writ petition filed by Nakulan of Kollam seeking a directive to Canara Bank to release the gold ornaments pledged as he had already cleared the loan. According to him, when took a personal loan in January 2012 from the bank, no security had been given. The petitioner later took another loan by pledging his gold ornaments. He said that though he repaid the gold loan, the bank was retaining it as security for his personal loan. The bank took the stand that the gold ornaments could be released only after the petitioner cleared his entire liability.

‘Banks can keep loan security for other liabilities’

The Kerala High Court has ruled that a bank is entitled to retain security, including gold ornaments deposited for taking a loan, even after clearing the same, if the borrower is yet to repay another loan. Justice V. Chithambaresh ruled that a bank had a general lien over all forms of security, including gold ornaments deposited by the borrower, for the entire outstanding balance amount due to the bank. The court made the ruling while disposing of a writ petition filed by Nakulan of Kollam seeking a directive to Canara Bank to release the gold ornaments pledged as he had already cleared the loan. According to him, when took a personal loan in January 2012 from the bank, no security had been given. The petitioner later took another loan by pledging his gold ornaments. He said that though he repaid the gold loan, the bank was retaining it as security for his personal loan. The bank took the stand that the gold ornaments could be released only after the petitioner cleared his entire liability.

‘Banks can keep loan security for other liabilities’

The Kerala High Court has ruled that a bank is entitled to retain security, including gold ornaments deposited for taking a loan, even after clearing the same, if the borrower is yet to repay another loan. Justice V. Chithambaresh ruled that a bank had a general lien over all forms of security, including gold ornaments deposited by the borrower, for the entire outstanding balance amount due to the bank. The court made the ruling while disposing of a writ petition filed by Nakulan of Kollam seeking a directive to Canara Bank to release the gold ornaments pledged as he had already cleared the loan. According to him, when took a personal loan in January 2012 from the bank, no security had been given. The petitioner later took another loan by pledging his gold ornaments. He said that though he repaid the gold loan, the bank was retaining it as security for his personal loan. The bank took the stand that the gold ornaments could be released only after the petitioner cleared his entire liability.

‘Banks can keep loan security for other liabilities’

The Kerala High Court has ruled that a bank is entitled to retain security, including gold ornaments deposited for taking a loan, even after clearing the same, if the borrower is yet to repay another loan. Justice V. Chithambaresh ruled that a bank had a general lien over all forms of security, including gold ornaments deposited by the borrower, for the entire outstanding balance amount due to the bank. The court made the ruling while disposing of a writ petition filed by Nakulan of Kollam seeking a directive to Canara Bank to release the gold ornaments pledged as he had already cleared the loan. According to him, when took a personal loan in January 2012 from the bank, no security had been given. The petitioner later took another loan by pledging his gold ornaments. He said that though he repaid the gold loan, the bank was retaining it as security for his personal loan. The bank took the stand that the gold ornaments could be released only after the petitioner cleared his entire liability.

‘Banks can keep loan security for other liabilities’

The Kerala High Court has ruled that a bank is entitled to retain security, including gold ornaments deposited for taking a loan, even after clearing the same, if the borrower is yet to repay another loan. Justice V. Chithambaresh ruled that a bank had a general lien over all forms of security, including gold ornaments deposited by the borrower, for the entire outstanding balance amount due to the bank. The court made the ruling while disposing of a writ petition filed by Nakulan of Kollam seeking a directive to Canara Bank to release the gold ornaments pledged as he had already cleared the loan. According to him, when took a personal loan in January 2012 from the bank, no security had been given. The petitioner later took another loan by pledging his gold ornaments. He said that though he repaid the gold loan, the bank was retaining it as security for his personal loan. The bank took the stand that the gold ornaments could be released only after the petitioner cleared his entire liability.

Tax implications of various Bank Deposit products

The tax season is on. You must have invested in various bank deposits. What is the tax implicaitons of various bank deposit products ?

In Banks you will normally have Savings Bank Account, Current Account, Sweep Account, Recurring Account, Fixed Deposits, Cumulative Deposits. Let us know the tax implications one by one.

Savings Bank Account: Banks do not deduct any tax on the interest earned by you on your Savings Bank account balance. But the interest earned is Taxable. Its your responsibility to add it to your total income and pay tax accordingly. But the good thing is that if you are individual or HUF you can get tax exemption of Rs.10000 under Section 80 TTA on your interest earned on SB deposits.

Comply with KYC formalities

Now a days you must be receiving calls/letters from your banks saying that you have to comply with KYC formalities as per RBI guidelines. What is KYC and what is its importance.

KYC stands for Know Your Customer. RBI or the Government wants the banks to know the customer whose account its having. Knowing stands for below points:

Name
Father's name
Present residential address
Permanent address
Date of birth
PAN number
Contact number
Email/website
Income Source
Present income
Family details
Loans if any etc

While filling your account opening form you must have noticed all these.

Banks normally take followind documents of each account holder;

Photo
ID proof (PAN Card, Election Card, Passport, Driving Licence etc.)
Address proof (Ration Card, Tel. bill, Ele. bill, Bank pass book etc.)
Introduction from existing account holder

Now with crores of money being routed through bank accounts, RBI/Govt. wants to get assurance that they are legitimate transactions and no money laundering/hawala/terrorists are involved in it.

Hence RBI has mandated all banks to update its customers KYC afresh by obtaining latest photo, ID proof and Address proof. As its applicable to all types of account holders and banks have lot of non operative accounts such updation is a herculean task for the banks. Hence banks are sending notices to all customers giving them certain time to submit the documents or else the accounts of customers will be freezed.

Hence kindly submit the KYC documents to your bankers early.

Rajiv Gandhi Equity Savings Scheme

Our honourable prime minister Mr. Manmohan Singh has put red carpet for attracting new investors to financial markets. The scheme is Rajiv Gandhi Equity Savings Scheme. For investment up to maximum of Rs.50000/- , the investors can get 50% tax rebate. This is one time sop for first time investor only. It is available to those with taxable income of upto Rs.10 lakh. But some riders are attached to it.

1. The investment must be in Top 100 shares of BSE or NSE.

2. The investment made in PSU companies can also get tax brake.

3. If the investment is made in Mutual Funds and ETFs then the scheme in which funds are invested must comply with above conditions.

4. The investments have lock-in period of 3 years.

5. But the investors can trade after one year but must maintain the level of investment and also keep points 1 to 3 in mind while reinvesting.

Do you know?

You can avail additional deduction of Rs.20000 from your income under section 80 CCF by subscribing to notified long term infrastructure bonds. This deduction is in addition to Rs.100000 you get under section 80 C for Provident Fund Contribution, LIC premium Payment, NSC, ELSS, Tuition Fee etc. So in total you can reduce your total income by Rs.120000 under above.

SB interest calculation

Interest on Savings Bank account is now being calculated on day end balance from 1st April 2011. Thus ending menthod of calculating SB interest on minimum balance during the month from 10th to last day.