IMPS – Its functionality, benefits and usage

In the last few years, the Indian government has launched several payment systems that facilitate immediate transactions. As the time went by and net-banking became advanced, customers could start making payments using their mobile phones. One such popular payment system launched by the government, and facilitated by the National Payment Corporation of India is the IMPS or Immediate Payment Service, which is one of the most secure methods of fund transfer. Available 24*7, IMPS facilities are offered by almost all big banks in India such as Axis Bank, HDFC Bank and nationalized banks like State Bank of India and Punjab National Bank among others. Let’s look at the functionality, benefits and uses of IMPS fund transfer.

How does IMPS work?

The IMPS system uses a customer’s mobile number and/or Aadhaar card number in order to connect with a bank account. If you choose IMPS to send money to any bank account, the system first connects you with your bank account using your registered mobile number. Unlike other payment methods such as RTGS or NEFT, IMPS does not directly transfer funds to the beneficiary’s account directly. Instead, funds are transferred from your bank account to your mobile number, after which the money is transferred to the beneficiary’s mobile number. The money is finally credited to the beneficiary’s bank account. All of this is done in real-time, within a few minutes.

Benefits of IMPS

Both, senders and receivers can reap several benefits by using IMPS transfer such as

• Money is sent in real-time and credited into the beneficiary's account within a matter of seconds
• This method of fund transfer is as safe and secure as it is efficient
• There is no minimum amount of money that you can transfer. You could transfer as little as ₹1 up-to ₹200,000 per day, depending on your bank
• The facility is available 24*7, even on public holidays and bank holidays
• Customers can make both intra-bank and inter-bank transfers using IMPS
• You can use IMPS on your mobile phones, for internet banking and even in ATMs
• You needn't know the beneficiary's account number or bank IFSC code. The money can be transferred using only the beneficiary's Aadhar card, mobile number and MMID
• Receive instant debit and credit confirmation via SMS

Usage and services

You can use IMPS to avail several services and to transfer funds using mediums like mobile phones; smart phones and basic phones. You can also use your bank's net banking facility or your ATM card to avail IMPS services. Apart from transferring funds using mobile number and MMID (mobile money identifier), Aadhar number and bank account and IFSC code, you may also choose from the following services for IMPS fund transfer

• Funds transfer via UPI; a mobile app based payment method
• Merchant payments – Use MMID to pay retailers
• USSD banking (*99# Banking) – It gives you the facility to transfer funds through your feature phone
• QSAM – dial *99*99# to know the Aadhaar number and bank account link status

United Payment Interface – the features and key drivers

With the arrival of the age of net-banking and mobile apps, the methods of making payments have so evolved that you can transfer and receive money in your bank account in a matter of minutes. Systems like IMPS, RTGS and NEFT were initiated years ago to make banking convenient. But nothing holds a candle to the world’s most advanced payment system; the United Payment Interface, a revolutionary payments system initiated in India.

Understanding the term

Developed by the National Payments Corporation of India, United Payment Interface or UPI is an instant, real-time payment system that facilitates inter-bank transactions. It powers multiple bank accounts into one unified mobile application (of participating banks) and merges various banking features such as fund routing and merchant payments into one application.  Regulated by RBI, this digital payment system is available 24*7. Every participating bank provides their own UPI app available for download on Android, iOS and Windows platforms. UPI deposits and withdraws funds from your chosen bank account whenever you request a transaction. Simply put, you can link all your different bank accounts into one application and conduct seamless transactions between them.

Features of UPI

Thanks to the UPI interface, users can avail numerous services and carry out the following transactions
• Sending and receiving fund
• Raising requests for funds
• Users can use another government initiated app, the BHIM app to make payments to merchants via QR codes (as in PayTM)
• Paying for several services such as cabs, restaurant services etc.

UPI interface key drivers
The main goal of implementing the United Payment Interface was simplifying the process of transactions and providing a single interface across all banking segments. The key drivers used to achieve this end include:

Simplicity: The idea behind UPI is to receive and make payments as easily as you make a call on your mobile phone. Just like making calls, accounts holders should be able to send and receive funds from their cell-phones, with the help of an identifier, excluding the hassle of other account details. Users can “pay to” or “collect from” a specified payment address like Adhaar card, mobile number, RuPay card etc., with a single click.

Adaptability: Since the potential user base was intended to be scalable and of use to billions, it became necessary to have an adaptable application. The UPI interface is designed to allow gradual adoption across smartphone users along with the ability to make use of information available across various payment players and phones. People using advanced phones can send money to those using basic phones and vice-versa.

Security: Security is always a major concern for users of advanced banking technologies like making a UPI payment. This interface provides end-to-end security as well as data protection. Important data like personal banking details are not revealed, reducing any chances of misuse. Added authentication features provide security against risks like phishing.

Apart from these factors, the UPI interface is also cost-effective and innovative.

Know the different savings bank accounts

The most basic type of bank accounts used by people across the world is a savings bank account. Savings accounts are the primary business products of every single bank and are easily available in every bank, whether it belongs to the public sector, or private sector. Along with the regular types of savings accounts, the Indian government has also introduced sponsored savings accounts, most of which are meant or people with lesser incomes or for those residing in rural areas. Here are some of the best savings bank accounts in India in which you can consider keeping your savings in.

Basic/regular savings account: A regular savings account offers a limited number of facilities and charges minimum fees. You can continue depositing as much amount as you please, over a period of time in this account. All savings accounts require you to maintain an average daily balance and you are penalized if you fail to meet this requirement.

Salary accounts: Popularly known as “zero balance accounts”, salary accounts can only be held by salaried individuals. Employers open salary accounts for their employees and deposit monthly remunerations directly into these account. You also get higher interest rates on money deposited in this account. If there is no salary credit for more than 2-3 months, this account changes to a regular savings account.

Joint accounts: A savings account operated by more than one holder is regarded as a joint account. With joint accounts, transactions like issuing cheques or withdrawing money can be done by either account holders. Debit cards holding the name of each account holders are also issued separately for all joint holders. Joint accounts are the best savings bank accounts in which you can add up-to 4 family members.

Savings account for minors: If your child is under the age of 18, you can open a joint savings account with him. The account can only be opened if one of the joint holders is an adult and a parent/guardian to the minor. The account transfers to a joint account when the minor turns 18.

Women’s savings account: Like the name suggests, this type of account can be opened only by women. Women can reap several benefits from this account such as discounted rates on other products offered by the bank, complementary personal insurance cover, higher interest rates etc.

Savings account for seniors: Individuals over the age of 60 can open savings accounts that offer certain benefits, not available to basic account holders, through the savings account for seniors. Features like higher rates of interest, special term deposit and offers and waiver on minimum balance requirement make this account especially ideal for retired persons living on pensions.

Pradhan Mantri Jan Dhan Yojana Savings Account: As per government directives, most leading banks offer this savings account which allow a maximum of 4 withdrawals per month and come with the Rupay Debit Card. You needn't maintain a minimum balance or pay any annual fees with this account. Additional benefits include free insurance cover of ₹30,000 and accidental cover of ₹100,000.

How to choose a consumer durable loan

We live in a smart world. A world of smart phones, smart televisions and smart home assistants, that can switch on lights, fans, and televisions on a single verbal command. But many of us struggle with coming up with the finances for such appliances. If you don’t have enough money to purchase these fancy gadgets, you can always opt for a loan. All you have to do is apply for a consumer durable loan by choosing from a range of financers. Also, consider the following factors before applying for the loan.

Consider the available options: You must first decide on the loan amount and the maximum amount you can allocate towards loan repayment before approaching a bank. Since you intend to use the money to purchase consumer products, ensure you opt for a consumer durable loan and not a personal loan, as the later can cost you more. Most durable dealers are tied up with financiers. Remember that financing costs may vary from dealer to dealer.

Criteria for selecting a lender: Before you finalize a lender, you must find, the minimum and maximum duration of the loan, and the down-payment amount. Also read the document t closely to understand the the total cost of the loan, repayment period and interest calculation method.

Effective finance cost: Remember that the effective finance cost differs from the rate of interest. The total cost of the consumer durable loan includes the interest charged along with the upfront service charges, processing fees and pre-payment charges in case you choose to prepay the loan. You may be charged either a flat amount or a percentage of the loan amount for the paperwork, all of which is profited by the financier. E.g. if you take a one-year loan for ₹20,000 at 15 per cent, paying ₹250 as upfront charges, your effective finance cost will be 16.25 per cent if we assume a flat interest charge.

Calculation of interest: Make sure that you are not charged on a flat basis. Most banks allow you to pay only the outstanding balance of the loan, and not on the full amount. Interests are calculated on daily, monthly, quarterly and annual basis. The most beneficial one is the daily reducing balance method since you only pay for days that you actually use the funds.  E.g. if you take a loan on January 25, and have to pay your first instalment on 7 February, in the daily reducing balance you pay interest only for 12 days.

Prepayment policies: If you decide to pre-pay your loan at some point, you are more likely to be penalized, which is why you must think about the loan tenure well in advance. You needn’t lock yourself in a longer tenure unless it is absolutely necessary.

Service quality: Consider important factors like time taken for paper work, processing the papers and getting the cheque, and easy methods of prepayment. Some banks even send over a representative to enhance your service experience, while other can make the entire process tedious, so select wisely when opting for a consumer loan service.

Everything you need to know about RTGS bank transfers

There used to be a time in Indian banking when the entire banking process was a physical exercise. Employers used to pay remunerations in cheques, which took a few days to clear. Plus, one had to run to the bank for every little thing. But ever since internet began dominating the world, banks capitalized on it to ease the entire banking experience by introducing net banking. RTGS is one such money transferring facility, of the many net-banking facilities that has made modern banking convenient and easy.

So what exactly is RTGS?

RTGS or Real Time Gross Settlement is a popular method of transferring funds, through which you can send money to any account without any delays, in ‘real time’. An electronic fund transfer system, RTGS transfer allows the funds sent by the remitter to reach the beneficiary/payee immediately after the transaction is initiated. ‘Gross Settlement is denoted by the fact that the transaction is processed on an individual basis and not batch wise.

How can I send money through RTGS?

Net banking is the only method you can use for sending money through RTGS. To initiate an RTGS payment, you would require a few details of the beneficiary. RTGS is even faster than the NEFT mode of payment. One of the finest features of wiring money through the RTGS system is that you can you can schedule transactions in advance. 

What information do I need about the Payee?

• Name of the payee as in their bank account
• Name of the bank, its IFSC code and its branch
• Payee’s account number
• The amount that must be transferred
Steps for making an RTGS payment
1. Enter your username and password and login to your net-banking account
2. Click on the ‘Funds Transfer’ icon visible on the home page
3. Choose RTGS as the mode of payment and enter the beneficiary details as mentioned above
4. Review the details entered before submitting. The money will be credited to the payees’ account immediately.

What are the features of RTGS transaction?

• RTGS allows the transfer of funds online in a real-time manner i.e. the beneficiary can withdraw the amount as soon as it is transferred.
• Typically designed for transactions of large values, RTGS can be used for transferring funds above a minimum of ₹200,000.
• Backed by the RBI, RTGS transfers are safe and secure and designed for immediate clearing
• Funds are credited on a one-on-one basis and can be scheduled in advance
• Transactions are executed on an individual and gross basis

Fees and Charges

The receiver does not incur any charges; however the sender must pay a small fee based on the amount he transfers. The sender must pay ₹30 per transaction for transfer amounts ranging from ₹200,000 to ₹500,000. He must pay ₹55 for any transaction above ₹500,000.

RTGS Timings

An RTGS transfer can be done from Monday to Saturday between 9:00 a.m. to 4.30 p.m. on weekdays and 9:00 a.m. to 2:00 p.m. on Saturdays.

Types and features of NRI accounts in India

The number of Indians working in foreign countries has shot up tremendously in the last few years. This phenomenon has resulted in Indian banks offering services that cater to such individuals who are earning in higher foreign currencies with the aim to save money and invest in Indian banks. These accounts facilitate fund transfer, investments, savings and earnings of the Non Resident Indian communities across the world. There are three types of NRI accounts which are authorized by financial institutions and banks in which you can maintain Indian and foreign currency earnings.

Non – Resident Ordinary (NRO) Savings Account: NRO accounts are ideal for NRIs who have a constant flow of income in INR, e.g. income earned through renting property, pension income, dividends etc., while they are residing abroad. NRO accounts are perfect for making local payments and other needs in India.

Features:

• Source of funds deposited in NRO account must be from within India, not abroad
• You must adhere to RBI laws before transferring money outside India
• NRO account is maintained only in INR
• The account can be opened jointly with an NRI or Resident Indian
• You can transfer funds to NRO or Resident accounts, but not NRE accounts
• You can submit a letter of authorization if you want a local representative to operate your account
• You must pay 30.9% tax on interest earned on NRO account

Non – Resident External (NRE) Savings Account: The most popular type of NRI bank account, an NRE facilitates an easy transfer of foreign currency to Indian accounts. All foreign exchange deposits which are received for credit in NRE accounts are converted to INR at the banks’ buying rates.

Features:

• You can only deposit foreign currency in this account
• While the money is deposited in foreign currency, the account is maintained in INR
• Since these accounts don't qualify for wealth tax, any interest earned on them is subject to tax exemption
• You can easily transfer money from your NRE account to another NRE account, NRO account or Resident account
• You can open this account jointly with another NRI, but are prohibited from opening it with an Indian Resident

Foreign Currency Non-Resident (FCNR) Fixed Deposit Account: With the FCNR account you can maintain your foreign currency in the same denomination, which helps curtail any losses incurred from currency fluctuations.

Features:

• FCNR accounts are operated in foreign currencies and you can deposit any foreign currency in it, except INR
• Interest earned on FCNR accounts is paid in the same foreign currency as it is being maintained in
• You are not charged any income tax on earnings through these NRI accounts
• You can open FCNR account jointly with another NRI, but are prohibited from opening it with an Indian Resident
• Deposits made in these accounts can last from 1 - 5 years maximum
• You can avail overdraft in your current or savings account against your FCNR FD
• You can maintain your FCNR account in currencies like USD, EUR, GBP, CAD, AUD and JPY

Taxes and NRO accounts

One of the most common causes of confusion among the Non Resident Indian community holding savings accounts in India is regarding tax laws. NRIs are not allowed to hold a normal resident savings account and must choose between either an NRE (Non Resident External) account, or an NRO (Non Resident Ordinary) account. Even though they open either of these accounts, not many are familiar about the tax implications and exemptions with regards to either account. Here’s everything you must know about tax laws for your NRO savings account.

Parking money in NRO accounts

NRO accounts allow you to deposit money in any currency of your choice, whether it is INR or any foreign currency like GBP, EUR or USD. On the other hand, you can only deposit foreign currency in your NRE account.

Tax implications for NRO accounts

If you have funds lying in your NRO account, you do not have to worry about paying taxes. However, the interest you earn on both your NRO savings account and your NRO fixed deposit is taxable under the income tax laws of India. The interest you earn is also eligible for tax deduction at source or TDS. As a result, you are charged taxes at 30.9% including applicable charges.

Consider the following example: If you earned ₹100,000 in the financial year ending 2018-2019 in your NRO account, then your bank will deduct ₹30,900 as interest tax. Furthermore, if the interest earned, either on the fixed deposit or the NRO savings account exceeds ₹1,000,000 (₹10 lacs) in a financial year, you must also pay an additional surcharge of 10%.

Tax Exemption for NRO account

As an NRO account holder, you can seek tax exemption if you are paying taxes in the foreign country in which you are residing. If your country of residence e.g. England, Singapore or USA, has entered into a Double Taxation Avoidance Agreement (DTAA) treaty and you are paying or have already paid the tax on interest earned on your NRO account in that country, you can get a concession on the TDS applied on your earnings. To avail the benefits from DTAA you must submit a tax residency certification (TRC) with a duly filled Form 10F along with your PAN details, without which you cannot avail the TDAA benefit. In case the country you’re residing doesn’t provide the TRC, you must submit
the unique tax reference number with the allotted country identification number. 

Is there an alternative?

Since the rate of taxes on interest is high for NRO savings account, you must try to avoid putting any additional money or amounts in foreign currency in this account and opt for the non-taxable NRE account. The smart thing to do is to use your NRO account only to deposit INR earned from rental income or cash gifts from, parents or other relatives.