CAIIB RETAIL IMP

Retail Banking- Deduction of Interest on Housing Loan – Sec 24b

Applicable for financial year 2015-16 and 2016-17

Section 24 of the income tax act provides deduction in respect of home loan interest.

Important points

1) Interest on housing loan is allowable as deduction on accrual basis not on paid basis (even if account books are kept on cash basis) if capital is borrowed for the purpose of purchase, construction, repair, renewal or reconstruction of the house property. Deduction can be claimed for two or more housing loans.

2)Interest includes service fees, brokerage, commission, prepayment charges etc.

3)Interest/penalty on unpaid interest shall not be allowed as deduction.

4)Deduction shall be allowed irrespective of the nature of loan whether it is housing loan or personal loan from any person/institution.

5) If a person instead of raising a loan from a third party pays sale price to the seller in instalments along with interest than such interest is also allowable.

6) Interest on borrowed money which is payable outside India shall not be allowed as deduction under section 24(b), unless the tax on the same has been paid or deducted at source and in respect of which there is no person in India, who may be treated as an agent of the recipient for such purpose.

7) For claiming deduction under this section, assessee must be the owner or deemed owner of the house property and loan shall be in the assessee name.

Maximum Limit of deduction under section 24b

These limits of deduction is applicable assessee wise and not property wise. Therefore if an assessee owns two or more house property then the total deduction for that assessee remain same.

1) In Let Out Property/Deemed to be Let Out – No maximum limit

2) Self Occupied House (SOP) – Rs. 2,00,000. (1,50,000 for A.y 2014-15 and before)

In the following cases the above limit of Rs 2,00,000 for SOP shall be reduced to Rs. 30,000

– Loan borrowed before 01-04-1999 for any purpose related to house property.

– Loan borrowed after 01-04-1999 for any purpose other than construction or acquisition.

– If construction/acquisition is not completed within 5 years from the end of the financial year (3 years till financial year 2015-16) in which capital was borrowed. For example, a loan is obtained for construction/acquisition on 28 Oct 2011 then the deduction limit should reduced to Rs 30,000 if the construction / acquisition completes after 31 March 2017.

Interest for pre construction/acquisition period Interest for pre construction/acquisition period is allowable in 5 equal instalment beginning from the year of completion of house property. This deduction is not allowable if the loan is utilized for repairs, renewal or reconstruction.

Pre Construction/Acquisition period starts from the date of borrowing and ends on the last day of preceding Financial Year in which the construction is completed. For example, if house property is completed on 21st March 2012 then the deduction is allowed from Financial Year 2011-2012 to 2015-16.

Example

Loan Taken on 01-05-2006 of Rs. 5,00,000

Construction End on 07-09-2012.

Pre Construction/Acquisition Period = 01-05-2006 to 31-03-2012

Pre Construction/Acquisition Interest = Rs 3,55,000 ( Rs 5,00,000*71 Months*1%)

Pre Construction/Acquisition Interest Deduction for Financial Year 2012-13 to 2016-17 assuming let out property or deemed to be let out = Rs 71,000 per year ( 3,55,000/5 )

Pre Construction/Acquisition Interest Deduction for Financial Year 2012-13 to 2016-17 assuming SOP = Rs 71,000 per year ( 355000/5 ) (as the construction is completed within 5 years from the end of the financial year in which capital was borrowed)

Interest from 01-04-2012 to 31-03-2013 shall be allowed as deduction in 2012-13 as current year’s interest. Interest from 01-04-2012 to 07-09-2012 shall not be considered as Pre Acquisition/Construction Period.

Note: – If a property is partly SOP and partly let out then also the limit of Rs 2,00,000/30,000 shall be available for SOP portion and there is no limit of deduction for let out portion even if the construction is completed after 3 years.

Retail Banking- Masala bonds

Retail Banking- Masala bonds

Masala Bonds represent the bonds issued for rupee denominated borrowings by Indian entities in overseas markets.

The International Finance Corporation (IFC), an investment arm of World Bank, issued Rs.1,000 crore bonds (which named it Masala Bonds) to fund infrastructure projects in India in Nov 2014.

These bonds were listed on the London Stock Exchange (LSE).

The name Masala bonds was chosen to give a flavour of Indian culture and cuisine.

The debt instruments (bonds) have been named after food stuffs in the past also (Chinese bonds, named Dimsum bonds after a popular dish in Hong Kong, Japanese bonds named Samurai after the country’s warrior class).

Benefit of issuing Masala Bonds:

An Indian company or issuer of an overseas bond offering bonds in foreign currency runs the risk exchange price fluctuation (foreign exchange risk).

The weakening of the Rupee during the tenure of the bond can add significantly to costs at the time of redemption or repayment.

By pricing or issuing bonds in Rupees, is able to pass on the exchange risk to the investors.

In addition, borrowing overseas can be relatively cheap

compared to borrowing in India, with average costs difference

of at least 200 basis points.

Further, it offers new and diversified set of investors for Indian companies, and more liquidity in exchanges such as London, apart from bank funding and the corporate bond market in India.

Benefit to foreign investor:

An investor buying such bond gains around 200 basis points above the globally accepted pricing benchmark LIBOR (London Inter-bank Offered Rate) after hedging for foreign exchange risks. With India’s GDP or national income rising, and projected to grow at a reasonably fast rate over the next few years, many overseas

investors may like to buy into such bonds to earn higher returns compared to the US and Europe where interest rates are still low.

Impact :

Many Indian companies with large borrowings abroad do not hedge their debt exposure or cover their risks. From the external balance sheet management point of view, issue of Masala Bonds will provide a natural hedge as it not give risk to foreign exchange risk.

Investment in Masala Bonds shall be a sign of acceptance of the Indian currency in trading and settlement overseas.

This will be testing the internationalization of the Indian currency over the medium and long term.

AEPS CAIIB RETAIL

Retail Banking

AADHAAR ENABLED PAYMENT SYSTEM (AEPS)

Benefits and Charges

Aadhaar Enabled Payment System is a way to get money from the bank account. This system of getting money neither requires your signature nor Debit card. You don’t even need to visit a bank branch for getting money through the Aadhaar Enabled Payment System. Rather, it uses Aadhaar data for the authentication. Like UPI and USSD, this is another initiative by the NPCI.

Benefits of Aadhaar Enabled Payment System

✅You can perform financial and non-financial transaction through the banking correspondent.

✅A banking correspondent of any bank can do the specified transaction of any bank.

✅There is no need of signature or debit card.

✅It is fast and secure. No one can forge your fingerprint.

✅Banking correspondent can reach to the distant rural place with the micro POS.

✅ Transactions Through the AEPS

✅ The Aadhaar Enabled Payment System gives you banking facility on the go. However, it gives you only basic services.

These 4 services can be done through the AEPS.

✅Balance Check

✅Cash Deposit

✅Cash Withdrawal

✅Aadhaar to Aadhaar Fund Transfer

Except Fund transfer, you can perform all the transactions through the banking correspondent of any bank. For fund transfer, you need the BC of your own bank.

Requirements for AEPS

Through the Aadhaar Enabled Payment System, you can get money without producing any paper or card. However, your Aadhaar number should be registered with your bank account. If you did not linked your Aadhaar with a bank account the Aadhaar Enabled Payment System would not be useful to you. For AEPS transaction, you need following information.

a) Aadhaar Number

b) Bank IIN or Name

c) Fingerprint

It means, you have to only remember your Aadhaar number to do the bank transaction. It is just like remembering own mobile number.

Aadhaar for Authentication

Remember, at the time of Aadhaar enrolment, your fingerprints and iris image were taken. These biometric data gets linked to the given Aadhaar number. These biometric data is unique to a person. No two person have the same iris image or fingerprints. Thus, your Aadhaar number can be verified by your finger prints. This biometric authentication makes Aadhaar the perfect proof for the banking transactions. Indeed, it has replaced the signature.

Working

Suppose, you claim to be Vijay and produce the Aadhaar number of Vijay. To verify it, bank official would take your fingerprints in a machine. The machine gives the fingerprint details to Aadhaar Payment app. The app immediately tallies your fingerprints with the fingerprints of the given Aadhaar. If it matches, the system would permit for the transaction. In case of mismatch, the system would not do any transaction.

Aadhaar Enabled Payment System Works

It surprising that only through the Aadhaar number you can access your bank account. But it is possible because the Aadhaar is linked to your bank account. This linking leads you to your bank account. The fingerprint is authenticated by the UIDAI. In response to a transaction, UIDAI tells to the bank about the authenticity of the user. Once, UIDAI authenticates, the bank gives green signal to the transaction.

Thus, in the Aadhaar Enabled Payment System 6 institutions are involved.

✅You, the bank customer

✅Banking correspondent – The facilitator of AEPS

✅The bank of BC – The bank to which banking correspondent is attached

✅Your Bank – the bank with which you held the bank account

✅NPCI – It does switching, clearing and settlement of transactions

✅UIDAI – For finger-print authentication

Charges of AEPS

Unlike UPI, the AEPS is a relatively costly transaction. It can go up to Rs 15 for one transaction. On the other hand UPI charge is free to nominal. For AEPS, three institution involved can charge fees. UIDAI may charge a nominal fees for authentication, however it is not charging yet. The NPCI charges 10 paise for authentication and 25 paise for settlement. The bank can charge 1% of the transaction value if it is related to other bank. The minimum fess for other bank transaction would be Rs 5 and maximum fees would be Rs 15.

AEPS may be costly than UPI and USSD but it gives a lot of convenience to the rural people. It would bring bank to their doorstep and save much time and transport expense. It would be just like a visit of ATM at every doorstep. That is why government calls the POS as micro AT

Case study on educational loan

RETAIL Planning

Dear All CAIIB members,

Congratulations for BFM exam ,maximum members  passed.

Now it’s the time for last exam. Easy  and scoring elective exam. Especially retail banking .I have shared Recollected questions Kindly go though it 1^st.

Next 1^st 100 pages easiest theory in Macmillan book read it. I think 1 hr enough to complete it.

Next concentrate on Credit cards especially important. Go through all the theory part.

Most import module is D other issues related to banking ..concentrate on it.

Securitization, Mortgage base securities  Reverse mortagage, e banking, SARFASAI,DRT,Masala Bonds

HOUSE FINANCE AND TAX PLANNING,Priority of charge and Tiltle to properties,PROPAGATE, CAPITAL GAINS,REGISTRATION OF DOCUMENTS,FSI Calculations.

LOANS RELATED CASE STUIDES ESPECIALYY CAR,EL,HL…

Finally latest updates very very very important  mostly BHIM ,PMAY, CERSAI,CKYC, UPI,AEPS MOBILE BANKING……..

All the best

Srinivas Kante

Plz find snap  review by one member

JAIIB PPB: Unit – 2 : Banking Regulation

Hello everyone.... I am Meenakshi.

In this part we will learn some important points from JAIIB PPB: Unit – 2 : Banking Regulation

Hope you Like it. Happy Reading :)

1. RBI was constituted under the RBI Act 1934.

2. RBI started functioning with effect from 1 Apr 1935.

3. RBI is a state owned institution under the RBI (Transfer of Public Ownership) Act 1948.

CAIIB NUMERICAL /CASE STUDIES

https://drive.google.com/file/d/1Y-4KZzipe1H3X5cfAFC_0Z5jgMylNPhm/view?usp=sharing

CAIIB RETAIL SHORT NOTES

https://drive.google.com/file/d/1k3WN69T5UKaC30Oud50jc2jf0pdpFKVE/view?usp=sharing

CAIIB RETAILS MCQs

https://drive.google.com/file/d/1S_BFJQrt7W3mSRDXRal4Jb8lxDnd4vZV/view?usp=sharing

CAIIB RETAIL::

Calculate Min. Amt. Due for dues of credit card

Finance Charges - Applicable in the event of the card member deposits part of the Total

Payment or the Minimum Amount Due. The amount attracts finance charges on entire

outstanding including fresh purchases and other bank charges till the date of full and

final payment.

Finance charges are calculated on a daily basis at the end of every day based on the

current outstanding balance of the customer.

Illustration:

• Balance ou tstanding as on the statement date - Rs.20000

• Balance is not paid on the due date.

• Interest - 3.5% per month

• Daily Interest Charge for th e above balance is

= 20000 x (3.5% x 12 months)/365 = Rs.23.01

• Total interest payable by the next statement c ycle (after 30 days)

= Rs.23.01 x 30 = Rs.690.41 + Service Tax

Case Study-3 CAIIB RETAIL

As we know banks and financial institutions are constantly committed to stop money

laundering by fulfilling the KYC norms of the customers. It helps in banks to know the

customer as well as help them to satisfy their needs. By KYC norms bank can cross sale

and up sale their product to the targeted group segment.

Q.1 What are the minimum time to revise KYC in A/c= 2 Years

Q.2 What is the time period for revise KYC to Low risk, Medium risk and High risk

customer consecutively- Ans : 10 : 8 : 2 Years

Q.3 What can be used as an official valid document for KYC purposes?

i) PAN CARD ii) JOB CARD issued by NREGA iii) RATION CARD

Q.4 If a customer opens a small saving bank account without fulfilling KYC Norms. His

annually dr. cr kitne honge

Case Study-2 CAIIB REATIL

As we know today private, public and foregin banks issues ATM to his customers. ATM is

a now 24 hour banking service provider, now cutomer use atm not only to withdraw

cash from machined but also to make shopping on various sites. Some banks offers

additional facilities on ATM card i.e Accidental cover and Some gives a facility to

withdraw money beyond the coutry limit. It has changed the banking scenerio globally,

today a person who don't have money in a foreign country can withdraw money from

ATM.

Q.1 max withdrawal limit for POS

Q.2 MAX withdrawl on other bank's atm in one transactions?

Q.3 Max free allowed limit on other banks ATM Machine?

Q.4 The bank promote using of ATM-- Ans to Reduce human cost on small payments

Case Study -1 CAIIB RETAIL

A bank "X" issued a platinum credit card to mr. A with a credit limit of rs. 1,00,000. The

bill date is 2nd of every month and due date is 22nd of the same month.

The rate of interest charged is 2.38% per month.

interest is calculated on daily basis.

Note: there is no interest charged fo r the first 50 month.

Overdue charges is rs. 600

Mr. A makes a shopping worth rs. 1,00,000 in the month of july and paid rs. 85000 on

22nd july and rest pays on 10th august with final payment.

Q.1 For how much days interest will be paid?

i) 18 days ii) 21 day iii) ..... days iv) No intere st will be paid as MAD is paid

Q.2 What will be the financial charges on final payment?

Q.3 How much payment he will make in the full settlement at 10 august?

Q.4 What will be the overdue charges for the month?

Q.5 What will be the late payment charges are levied on him?

CAIIB RETAIL::

A.B. purchased a license to engage in the transportation services for which he paid 6000.

Moreover, he paid 30000 for the purchased car.

He hopes to replace a car with a new one every three years, hoping to allocate 30000 for a new car.

In addition, he can sell the car for 10000.

Determine the costs of this business, if the interest rate is 12%.

We have that the initial business costs are 35000,

the replacement costs are R = 30000 - 10000 = 2 0000,

In addition, i = 0.12; c = 3; p = 0.404928: Then

K = 35000 + (20000/0:404928)

= 84391.5

Thus, the c apitalized general business costs will be 84391.5

CAIIB RETAIL:

The device, the cost of which is 120000, must be replaced after six years.

It is known that after six years the used equipment could be sold for 2000 0.

Set the value of the property at the present moment (capitalize the costs) if the interest rate is 10%, which is

converted once a year?

We have that OV = 120000, the replacement costs R = 120000 - 20000 = 100000,

In addition,

i = 0.15;

c = 1/(1/ 6) = 6 and

p = 1.1^6 - 1 = 0.7 716

Then

K = 1 20000 + (100000/0.7716)

= 249607.4

CAIIB RETAIL

Suppose that during the rent of a property the owner earns the income of 60000 on a quarterly basis.
Set the value of this liability at the current moment;
in other words, determine the price of this property, if it was sold at the present moment at the interest rate:
1) of 8% converted on a quarterly basis?
2) of 8% converted on an annual basis?
We have that
1) R = 60000;
i = 0.02;
A = 6000 0 / 0.02
= 3000000:
Thus, the market value of this property is 3000000.
2) In the case we have a complex annuity,
thus: R = 60000, i = 0.08, c = 0.25 Then
p = 1.08^0.25 - 1 = 0.0194265
A = 60000/0.0194265 = 308855 7
In this case the value of this property is 3088557.