Module - 3

Bank Products
Contents of the Module
• Bank Products
• Bank Accounts: Savings, Current, Recurring Deposit, Fixed, Zero Balance
(Jan Dhan), Student, NRI, Pigmy Deposit, Procedures and Documents
involved in opening bank accounts.
• Bank Advances: Principles of Bank Lending, Kinds of Loans: Short-term,
Cash credit, Overdraft, Pledge, Hypothecation, Mortgage, Discounting, Letters
of Credit, Retail Banking Services: Home loans, auto loans, personal loans,
safe lockers, jewel loans, Consumer Durable Loans, Education Loans.
Bank Account
• A bank account is a financial account maintained by a bank or
other financial institution in which the financial
transactions between the bank and a customer are recorded.
• Each financial institution sets the terms and conditions for each
type of account.
• A customer may have more than one account.
Types of Bank Accounts
• Initially, there were only four types of bank accounts that were
operating in India. These included the Current Account, Savings
Account, Recurring Deposit Account and Fixed Deposit Account.
• But later with the advancement in the banking sector, various
other types of bank accounts were introduced.
Savings Account
• Savings accounts can be opened by an individual or jointly by two people with an aim to save
money.
• The main benefit of opening a savings bank account is that the bank pays interest for opening
savings account.
• Features of the Savings account:
• There is no limit to the number of times the account holder can deposit money in this account but there
may be restriction on the number of times money can be withdrawn from this account.
• The rate of interest that an account holder get varies from 2.50% to 7.00% per annum depending on the
amount of savings.
• There is no minimum balance that needs to be maintained for this type of an account
• The savings account holders can get an ATM/Debit Card
• Savings bank account is further divided into two types: Basic Savings Bank Deposit Account (BSBDA) and
the other one is Basic Saving Bank Deposit Accounts Small Scheme (BSBDS)
• The savings bank account is mostly eligible for students, pensioners and working professionals
Basic Savings Bank Deposit Account
(BSBDA)
• BSBDA is a no frills zero balance account, there are a few conditions placed on it. The idea is for the
account to serve someone from the economically weaker section, and keeping those customers in mind,
the conditions are valid.
• Features of the BSBDA:
• This account does not have a minimum balance. In contrast, a BSBDA has a maximum account balance that has to be
maintained.
• An upper monetary limit to the balance that can be maintained in this account i.e Rs. 50,000
• An upper monetary limit to the total of credits made to this account in a year, i.e Rs. 1,00,000
• An upper monetary limit to the withdrawals made in a particular month i.e Rs. 10,000
• A maximum of 4 withdrawals in a particular month (including ATMs, RTGS, NEFT, branch cash withdrawal, standing instructions,
EMIs )
• The BSBDA holder will get an ATM cum Debit Card as a part of the account opening formalities.
• The holder will also get passbook services, email statements, Demand Drafts, cheque collection for free and not be
charged for a non operative account.
• KYC Documents are required
• The bank allows a certain number of deposits and withdrawals in the month that are free of cost.
• Banks offer the same rate of interest on these accounts as they do for a Regular Savings Account.
Basic Saving Bank Deposit Accounts Small
Scheme(BSBDS)
• These are accounts with relaxed KYC, with a minimum document
requirement of self-attested address proof & photograph.
• Total credit should not exceed 1Lakh rupees in a year.
• Maximum balance should not exceed Rs. 50,000/- at any time.
• Cash withdrawals & transfers must not exceed Rs.10, 000/- in a
month.
• Remittance from the foreign account cannot be credited to this
account without completing normal KYC formalities.
• This account can be opened only at Core Banking Solution linked
branches of banks or at such branches, where it is possible to
manually monitor the fulfilment of the conditions.
Current Account
• These accounts are not used for the purpose of savings.
• Features of the Current account:
• This type of bank account is mostly opened by businessmen. Associations, Institutions, Companies,
Religious Institutions and other business-related works, the current account can be opened
• There is no fixed number of times that money can either be deposited or withdrawn from such
accounts
• Internet banking is available
• This type of bank account does not have any fixed maturity
• Overdraft facility is available for current bank accounts
• Interest rate is charged only by the banks on the utilized amount from the total sanctioned limit
• The repayment tenure is decided by the bank
• As per the RBI regulations, current accounts are eligible for a maximum of Rs. 50,000 Overdraft per
week
• There is no interest that is paid on such accounts
Fixed Deposit Account
• FD or a fixed deposit account is another type of bank account that can be opened in
any Public or Private sector bank.
• Features of the Fixed Deposit account:
• It is a one time deposit and one time take away account. Under this type of account, the account
holder needs to deposit a fixed amount of sum (as per their wish) for a fixed time period
• The amount deposited in FD account can only be withdrawn all at once and not in instalments
• Banks pay interest on the fixed deposit account
• The rate of interest depends upon the amount deposited and for the time duration of the FD
• Full repayment of the amount is available before the maturity date of FD
• The interest rate on FD is 3% to 9.54% per annum
• For senior citizens, the interest rate offered will be 0.50% higher than regular citizens
• Interest on Fixed deposit is taxable
Recurring Deposit Account
• Recurring Deposit account or RD account is a form of account wherein the account holder
needs to deposit a fixed amount every month until it reaches the fixed maturity date.
• The features of the Recurring deposit account have been discussed below:
• Any individual or an Institution can open a recurring deposit account either separately or jointly
• Periodic or monthly instalments that need to be added can be as low as Rs.50/- or may vary from bank
to bank
• The range of months for which an RD account can be opened varies from 6 months to 120 months
• The interest rate varies depending upon the bank
• Nomination facility is also available for RD accounts
• Passbook is issued for this type of bank account
• Premature withdrawal of the amount is permitted, provided a sum of amount is deducted as penalty
Student Account
• Student bank accounts are specifically for young people enrolled
in a university.
• The eligibility to apply for this account for a student is that they should be
studying a pre-approved course and be 18-27 years old.
• Few banks allow the account be opened by a student who is older than ten
years but all the formalities should be done through a legal guardian.
• No minimum Balance required
• Free Internet banking, E-mail alerts, cheque leaves.
• Interest earned is exempt from taxes in India and taxable in other
countries
NRI Account
• When an Indian Resident becomes an NRI, the first thing he/she should do is to change the status of their resident
account to NRI Bank Account. It is illegal for NRIs to keep their resident savings accounts in India.
• For managing different needs, NRIs require different bank accounts in India.
• Non Resident (External) Account: To transfer and easily repatriate the money this account is required. The
currency will be converted to Indian Rupees within the account. This account can also be used to make
investments in India as well as to pay expenses in foreign countries. Additionally, it is possible to open savings,
current, recurring, and fixed deposit accounts. The money lying in the NRE account is fully repatriable and can be
transferred to another NRE or NRO account, without any limits. The Interest earned on this account is exempt
from any taxes in India but may be taxable in the account-holder’s country of residence. Since the account is
opened using foreign currency and is converted to the Indian Rupee, it is subject to exchange rate fluctuations.
Banks grant loans in India as well as in the foreign country against this account.
• Non Resident Ordinary Account: To receive the credit from Indian sources of Income this account is useful. For
example, Rental income from a property, Dividends from shares or mutual funds, Interest Income which is
received in Indian currency NRI must open NRO account. Also, it can be used to make any local payments like-
loan EMIs, insurance premiums, etc. NRO Accounts can be opened as savings, current, recurring, and fixed
deposit account. The interest earned on the NRO account, whether it is savings or fixed deposit is subject to TDS.
Bank can also grant you loans in India against this account with certain restrictions
Explanation
• NRE Account: If NRI wants to send foreign currency to India in rupee.
• Used to invest in India
• Pay for expenses in India and foreign countries
• Transfer money from this account to another NRI/NRO account
• Avail loans through this account from Indian banks and foreign banks
• Open savings, current, fixed and recurring deposit accounts
• NRO Account: To receive money from India.
• Rent from house property in India, dividends, Interest
• Pay for expenses in the foreign country
• Open savings, current, fixed and recurring deposit accounts
• Interest earned on NRO account is subject to TDS
Pigmy Deposit Account
• Pigmy Deposit accounts are also called as Daily deposit account.
• It is a monetary deposit scheme introduced by Syndicate Bank, India.
• The scheme was introduced to help daily wage earners, small traders and farmers begin
saving, as a means to fund their bigger capital requirements.
• Money in amounts as small as five rupees can be deposited into an account on a daily basis,
by a bank agent collecting the money from the account holder's doorstep.
• Choice to opt for Scheme Period from 12, 24, 36 months.
• No penalty even if depositor is unable to pay contribution regularly.
• No tax will be deducted for the interest on the deposit.
• Account Holder can withdraw the amount after 6 months without penalty.
Nostro and Vostro Account
• Nostro and vostro are terms used to describe the same bank account; the terms are used
when one bank has another bank's money on deposit. Nostro and vostro are used to
differentiate between the two sets of accounting records kept by each bank.
• Nostro comes from the Latin word for "ours," as in "our money that is on deposit at your
bank”. Vostro comes from "yours," as in "your money that is on deposit at our bank”.
• Nostro account: is a reference used by Bank A to refer to "our" account held by Bank B.
Nostro is a shorthand way of talking about "our money that is on deposit at your bank”. The
Nostro account is the record of the bank that has money on deposit at another bank. These
accounts are often used to simplify settlements of trade and foreign exchange transactions.
Nostro accounts differ from standard demand deposit bank accounts in that they are
usually held by financial institutions, and they are denominated in foreign currencies.
• Can be Opened by Bank Only: The dealer in foreign exchange cannot go to the foreign bank and ask the bank to pay. No dealer can
directly deal with the foreign currency. It is only through the domestic bank and domestic bank is only allowed to open the NOSTRO
Account with the foreign bank held in domestic country.
Nostro and Vostro Account contd…
• Example of Nostro Account: An Indian dealer Mr. A want to pay amount in US dollars to the dealer in
US for import of goods. Now Mr. A will approach his bank to set the dollar account on behalf of him as
he wanted to make payment in dollars against the goods imported from US. The local bank approached
by Mr. A will approach to the foreign bank with which the bank is having banking relations and physical
location in India for opening of NOSTRO Account. The bank will convert the amount paid by dealer A in
US dollars against the equal amount of domestic currency paid or guaranteed by Indian dealer so that
the dealer can pay in US dollars and this account can last for all transactions dealing in US currency i.e.
dollar. Say domestic bank approached by Mr. A is state bank of India which opens account with Bank of
America in New York then the account opened by SBI is referred as NOSTRO Account.
• Nostro Account is required due to the following reasons:
• It is used for settlement in the Foreign currency.
• It is used for settlement of international transactions involves payment or receipt in currency other than foreign currency.
• To give guarantee to the foreign dealer that his money will be guaranteed paid in form of prior guarantee to the foreign bank
from domestic bank.
• To give facilities and promote the foreign transactions and dealings.
Nostro and Vostro Account contd…
• Vostro Account: Vostro is the term used by Bank B, where bank A's money is on deposit.
Vostro is a reference to "yours" and refers to "your money that is on deposit at our bank." A
vostro account is like any other account held by a bank. The account is a record of money
owed to or maintained by a third party, typically another bank, but it can be either a
company or an individual.
• Difference between Nostro and Vostro Account:
• The key differences between Nostro account and Vostro account are as follows:
• It is the account which is maintained by domestic bank with the foreign bank in foreign currency
whereas the VOSTRO account is the account held by foreign bank in home currency of that bank.
• Nostro is latin word which means ours i.e., our account with you. Whereas the Vostro is the latin word
derived from yours i.e., your account with us.
• Domestic bank state bank of India opens the account with bank of America in US dollars for State
bank of India it is the NOSTRO account maintained with Bank of America and for Bank of America it is
VOSTRO account maintained by State Bank of India.
 USA
India
Bank A Bank B
Bank A opens NOSTRO account • Mr X deposits money in Nostro Account of
with Bank B Bank A which has correspondent
relationship with Bank B
• Bank B has VOSTRO account of Bank A

Mr. X (Indian Dealer) Mr. Y (US Dealer)

 Documents required to open a bank
account
• Documents required to open a bank account:
• PAN card/Form 49A along with Form 60 (if PAN has been applied for)
• Recent photograph in color
• An account opening cheque from an existing bank account
• Address Proof
• Identity Proof
Identity, Relationship and Age Proof Address proof
Valid passport with photograph and signature Utility Bill
Driving License issued by the applicable regional transport Property or Municipal Tax receipt.
authority
Voter ID or Electoral Photo Identity Card Identity card (ID card) with the applicant’s Photograph. This card
must be issued by Central or State Government Departments,
Statutory or Regulatory Authorities, Public Sector Undertakings
(PSUs)
Job card which is issued by NREGA (National Rural
Employment Guarantee Act) and signed by an officer of
the State Government.
Aadhaar letter card issued by UIDAI.
Bank Advances
Bank Advances and Principles of Lending
• One of the primary functions of the commercial banks is lending.
Lending of funds constitutes the main business of bank.
• Bank makes loans and advances to traders, businessmen,
industrialists and agriculturists to meet their financial
requirements.
• Principles of banking: A banker follow certain basic principles of
lending while carrying out lending and credit operations. Banks
follow some fundamental principles of lending in order to ensure
safety, security and profitability on money it lend.
• The important principles of lending includes: Safety, liquidity,
purpose, diversity or risk spread, profitability, security.
Principles of Lending
• Safety: Banks deal with public money so safety of money from public is first priority of
bank. Banker should ensure that the money is in safe hand and will definitely come back at
regular interval as per repayment schedule without any default. Safety of funds depends on
nature of security, character of borrower, repayment capabilities and financial health of the
borrower.
• Liquidity: Bank lend for short periods only because they lend public money which can be
withdrawn at any time by depositors. They, therefore, advance loans on the security of such
assets which are easily marketable and convertible into cash at a short notice.
• Diversity: In choosing its investment portfolio, a commercial bank should follow the
principle of diversity. It should not invest its surplus funds in a particular type of security
but in different types of securities. It should choose the shares and debentures of different
types of industries situated in different regions of the country. Diversification aims at
minimizing risk of the investment portfolio of a bank.
Principles of Lending contd…
• Profitability: Like all other commercial institutions banks are run for profit. Banks earn profit to
pay interest to depositor, to declare dividend to share holder meet establishment charges and
other expenses. A banker should employ its funds in such a way that they will bring him
adequate and steady returns.
• Purpose of loan: Purpose of the loan has assumed a special significance in the present day
concept of banking. Before lending loans, a banker should enquiry about the purpose for which it
is needed. Loans granted for productive purpose increases the earning capacity of the borrower
and ensure prompt repayment. Loans for undesirable activities should be discouraged.
• Security: Customers may offer different kinds of securities viz., land and building, machinery,
stocks, shares, debentures, goods, documents of title to goods etc to get advances. The security of
the customers are insurance and banker can fall back upon them in times of necessity. Therefore,
the banker should ensure that the security are adequate, marketable and free from
encumbrances. Securities, which could be marketed easily, quickly without loss, should
preferred.
Principles of Lending contd…
• Public policy or national interest: Banking industry as a
significant role in the economic development of a country.
Therefore a banker should identify his lending business with
national policies. Banks should grant advances to those sectors
which require development in the countries planning programs.
Bank credit should be made available to the neglected sectors of
the economic activity and to the under privileged sections of the
society.
Bank Loans
• A loan is a present amount of money lent by one party to another
in exchange for future repayment of the total value of loan along
with interest and or other finance charges.
Cash Credit
• Cash Credit is a drawing account against credit limit granted by the Bank and is
operated in almost the same manner as a Overdraft account.
• The borrowing limit is fixed by the bank.
• Till this limit is not exhausted, the borrower can withdraw and deposit funds any
number of times.
• The bank determines the borrowing limit based on the drawing power of the borrower.
• A cash credit facility is extended against security. Securities may be in the form of stock,
debtors, etc., as primary security and fixed assets and other imas collateral security.
• The interest in this facility is not charged on the borrowing limit, which the bank gives
but on the daily closing balance.
Bank Overdraft
• Bank overdraft is a type of financial instrument that is provided to
some customers by the bank in the form of an extended credit
facility, which comes into effect once the main balance of the
account reaches zero.
• In other words, bank overdraft is an unsecured form of credit that
is mainly used for covering short term cash requirements.
• Banks offer a credit limit to the bank customers based on their
relationship with the bank. The bank levies separate interest and
charges towards non-maintenance of account. The interest rate for
the overdraft facility may vary from bank to bank.
Difference between Cash Credit and
Overdraft
Cash Credit
It is associated with Cash Credit Account
Borrowing limit is flexible as per the security
Term is up to 1 year
Overdraft
It is associated with current account.
Borrowing limit is fixed
Term is up to 1 week to 1 month
 Pledge, Hypothecation and Mortgage
• Pledge:
• Pledge is commonly used for goods or securities such as gold, stocks, certificates, etc.
• The lender (pledgee) holds the actual possession of such securities until the borrower (pledger) has the borrowed
amount with him.
• Once the borrowed amount has been returned, the securities are returned as well. If the pledger defaults on the loan
amount, the pledgee can sell off the goods pledged to him as security in order to recover the principal and the interest
amount.
• In this case risk of lending comparatively reduces because possession of assets is with the lender.
• Hypothecation:
• Hypothecation is usually when the charge is on movable assets rather than having a charge on fixed assets.
• However, hypothecation is different from pledges in the sense that the possession of such movable security stays with
the borrower. Hence, in the event of default, the lender is first required to take possession / seize such property or
asset in order to recover the principal and interest.
• An example of hypothecation is vehicle financing, where the lender has the asset that has been hypothecated against
the loan with a bank.
• If the borrower defaults, the bank then takes possession of the vehicle after sufficient notice to recover the money.
• Mortgage:
• Under a mortgage, the legal ownership of the asset can be transferred to the lender if the borrower defaults on the
loan amount.
• However, the borrower continues to remain in possession of the property. A mortgage is usually used for immovable
assets
Letter of Credit
• Letter of Credit is an irrevocable undertaking issued by a bank, on behalf of the buyer, to the seller to
pay for goods and services provided that the seller presents documents which comply with the terms
and conditions of the documentary credit.
• Letter of Credit is also known as Documentary Credit.
• A letter of credit is issued against a pledge of securities or cash. Banks typically collect a fee, ie, a
percentage of the size/amount of the letter of credit.
• Since the nature of international trade includes factors such as distance, different laws in each
country and the lack of personal contact during international trade, letters of credit make a reliable
payment mechanism.
• Parties to a Letter of Credit
• Applicant (Buyer) requests the bank to issue the LC.
• Issuing bank (Buyer’s bank which issues the LC [also known as the Opening banker of LC]).
• Beneficiary (Seller).
• Advising Bank [Seller’s bank]
Letter Issues
of LCCredit
in favour of the Seller and sends to AB in electronic form (SWIFT)
Advising Bank/
Issuing Bank/ AB sends the documents to Issuing Bank
Negotiating
Opening Bank
Bank
Issuing Bank pays back to the AB
Checks the authenticity If all conditions are
Checks the authenticity
of LC and informs the fulfilled by the
of documents and if
Pays the Seller (Advising) Seller then AB
terms are fulfilled.
amount releases the value
Presents the documents Seller submits the
in LC (Negotiation
to the Buyer. documents to AB
of Docs)
Enters into a contract with terms and conditions
Buyer Seller

Presents the documents

to the Transporter and
takes the delivery of the
goods.

Transport
Agency
Home Loans
• Banks and other housing finance establishments offer different types of home loans these days.
The demand for Home Loan has increased manifold in recent years and people have different
expectations when it comes to a home loan. To cater to the requirements of different sections of
society, a lot of banks have come up with this concept of introducing different home loan
schemes. To quote a few, several banks offer specially crafted home loans for women,
agriculturalists and loans exclusively for purchase of land.
• Types of Home Loan:
• Loans for Purchase of Land
• Loans for Home Purchase
• Loans for Construction of a House
• House Expansion or Extension Loans
• Home Conversion Loans
• Loans for Home Improvement
• Balance Transfer Home Loans
Home Loans contd….
• Loans for Purchase of Land: Several banks offer loans for land purchase. Purchasing a land is a
flexible option, the buyer can save funds and construct a house whenever his finances allow or just
have the land as an investment. Up to 85% of the cost of the land is given as loan by the banks.
• Loans for Home Purchase: The most popular type of home loan is the loan for purchase of a new
or a pre-owned home. This loan is also commonly available and is offered by many banks in
different variants. The interest rate is either floating or fixed and generally ranges anywhere
between 9.85% and 11.25%. Also, 85% of the total amount is offered as a loan by many banks.
• Loans for Construction of a House: This loan is specially designed for people who want to
construct as per their wish rather than buying a pre-constructed house. The approval process for
this type of loan is different for it takes into account the cost of plot also. The most important
clause when applying for a home construction loan is that the plot must have been purchased
within a year for the plot cost also to be included in the loan amount. The loan amount is decided
based on a rough estimate of the construction cost. The amount may be disbursed at one go or in
multiple installments.
Home Loans contd….
• House Expansion or Extension Loans: Banks also offer loans for house expansion including
alteration of current structure and construction of new rooms.
• Home Conversion Loans: People who have already availed a home loan and have purchased a
house with it but want to move to a new house can opt for home conversion loans. By
transferring the current loan to new house, borrowers can fund the purchase of the new home
and also need not repay the previous home loan. Though it offers convenience, this segment of
home loan is also very expensive.
• Loans for Home Improvement: If the customers lack the finances for the renovation and repair
works like external and internal repair, painting, construction of overhead water tank and
electrical renovation, home improvement loans are availed.
• Balance Transfer Home Loans: This option can be availed when an individual wants to transfer
his home loan from one bank to another bank owing to reasons like lower interest rates or better
services offered by the other bank. This is done to repay the remaining loan at a revised, lower
interest rates offered by the other lender.
Auto Loans
• In India, the loan for a vehicle comes in different basic types as listed below.
• New car loan: This loan option is available for people who want to buy a brand new car. The
loan can be taken to buy any car model from any maker. The borrower have to pay an interest
of 9-14% per year over a period of one-seven years.
• Used car loan: Most banks will finance up to 85% of the car’s price. The interest rate is 12-
18% per annum. Loan tenure ranges from 1-8 years to complete the repayment. However, to
get a loan for the previously owned car, the vehicle has to be less than five years, and, at the
time of the loan’s maturity, the car cannot be more than ten years old.
• Commercial vehicle loan: A business organization or an individual, who owns a business that
requires cars, can opt for a commercial vehicle loan. This kind of loan comes with a 10-15%
interest rate that have to be paid yearly over a period of six months to five years. The amount of
loan depends on the business’ yearly turnover and the number of cars the business already
owns.
Auto Loans contd…
• Two-wheeler loan: The loan for two-wheelers comes with a
yearly interest rate of 11-18% on the amount paid for the bike.
The borrower have to be at least 18 years of age to avail this loan.
However, some lenders require a minimum age of 21 years.
• Tractor loan: The tractor loan is available for people or
organizations, which have a regular source of income from any
agricultural activity. It is also available for people who want to rent
tractors as a business. The tractor loan is available for a yearly
interest of 12 % on the loan amount. Loan tenure is 5 years.
Personal Loans
• Personal Loan is an unsecured credit provided by financial institutions based on criteria like
employment history, repayment capacity, income level, profession and credit history.
• Personal Loan, which is also known as a consumer loan is a multi-purpose loan, which can be
used to meet any of the immediate needs of a borrower.
• Unlike other types of loans like Home Loan or Gold Loan, where providing several documents is
mandatory, Personal Loans require minimum documents and the approval process is quick.
• With various financial institutions offering Personal Loan online services, the loan amount is
disbursement within a few hours provided the lender is convinced of your repayment capacity.
• Loan tenure is flexible and generally ranges from 1 to 5 years.
• Documents required for the Personal Loan includes: Proof of Income (salary slip, bank account
statements, ITR forms), Proof of residence and identify, certified copy of the degree and license
( in case of self-employed applicant).
Gold Loan
• A gold loan is a secured loan with which the borrower opt for the
required loan amount against ornaments and gold coins at
affordable interest rates.
• The borrower should pledge the gold with the bank, and according
to the overall value of the gold, the loan amount will be credited to
the borrower’s account.
• In any case of default, the banker can sell the assets and recover
the loan amount.
• The maximum tenure of gold loan is up to 7 years and as short as
12 months.
• The average interest rates range from 10% to 16% per annum.
• Loan amount may range from 90% to minimum of 65% of overall
Consumer Durable Loan
• A consumer durable loan, as the name suggests, is a financing
solution that helps the borrower purchase all household items and
durable goods.
• It covers all items right from basic necessities such as a washing
machine and microwave to luxury items such as high-end tablets
and LED TVs.
• Its only requirements from an applicant are an identify proof, a
proof of residence, income proof and lastly, to be in the age group
of 21 to 60 years.
• Depending on the bank, this loan can be availed at 100% financing
at extremely low or zero interest rates.
Education Loan
• An education loan is a sum of money borrowed to finance post-secondary education or higher education-related
expenses.
• Education loans are intended to cover the cost of tuition, books and supplies, and living expenses while the
borrower is in the process of pursuing a degree.
• Payments are often deferred while students are in college and, depending on the lender, sometimes they are
deferred for an additional six-month period after earning a degree. This period is sometimes referred to as a
"grace period.“
• The loan amount can vary from minimum Rs 1 lakh to Rs 1 crore, depending the student’s area of study.
• The financing covers other expenses such as the cost of laptop or travel expenses
• The education loan repayment tenure can exceed up to 12 years, after the completion of the course.
• Documents required for applying loan are:
• Marksheet and passing certificate of 10th and 12th exams
• Admission Letter from the respective college/university
• Fee structure
• KYC document of the applicant and co-applicant
Safe Locker
• Locker facility is a value added service provided by banks to their customers. The locker facility can be availed by
individuals either singly or jointly, partnership firms, Limited companies, Clubs, associations, trusts, societies etc.
• It is clarified by RBI that the relationship between the bank and the locker hirer is in the nature of a ‘bailor and
bailee’ and not ‘landlord and tenant’ though the bank has no knowledge of the contents of the locker and the bank is
required to exercise due care and necessary precaution for the protection of the lockers provided to the customer.
• RBI vide circular DBOD. No.GC.BC.27/C.408C (L) – 84 dated March 27, 1984, to the public sector banks, advised that
they should not insist fixed deposit as a prerequisite for allotment of lockers.
• Banks were, however, permitted to either seek a deposit (but not as a condition for allotment), the interest on which
may cover the annual rent or alternatively advance locker rent could be collected up to three years.
• The locker rent charged by banks may not be uniform in all the banks. The rents vary depending upon size of the
locker and location of the locker leased.
• Rent for Safe Deposit Lockers is charged annually and rent is payable in advance at least for one year with an option
to pay rent for 3 years.
• If the locker-hirer is having a fixed deposit with the bank, it can be earmarked for an amount so that the interest
covers the locker rental as an alternative to collecting the annual locker rental in advance.
End of the Module