Electronic fund transfer: Its types and benefits

Electronic payments have become the norm, especially after demonetization. Banks offer several different options for transferring funds online. Such transfer of funds online is called Electronic Fund Transfer.

Electronic fund transfer is the transfer of money without the involvement of bank staff. Fund transfers can be done across multiple banks or in the same bank.

Types of Electronic fund transfer:

1. National Electronic Fund Transfer (NEFT):
This is the most popular mode of electronic funds transfer. In NEFT, transactions are settled in hourly batches throughout the day. The beneficiary has to first be added before money can be transferred. Banks may set daily limits for NEFT transactions. Charges for NEFT typically depend on the amounts transferred. NEFT fund transfer can be done either online or at the bank branch.

2. Real Time Gross Settlement (RTGS):
RTGS is a type of electronic fund transfer used for high value transactions. A typical RTGS transaction amount is above Rs. 2 lakhs. Each transaction via RTGS is settled individually which means the funds transferred are immediately credited to the other party’s account. The RTGS system is maintained by the RBI.

3. Instant Money Payment System (IMPS):
IMPS is a type of electronic funds transfer system started by the National Payments Corporation of India (NPCI). IMPS involves a mobile money identifier code, which when input, allows the user to transfer money. IMPS is available 24x7. It is now possible to transfer money directly via IMPS by using bank account number and IFSC code.

4. Unified Payment Interface (UPI):
This is also a type of electronic funds transfer system started by NPCI. To use UPI, a user has to create a unique UPI ID and set a code. While making a transfer, the user has to input the UPI ID of the recipient and the decided code and funds are transferred immediately.

5. SWIFT remittances:
These remittances are interbank transfers between countries. They are used for foreign exchange remittances.


Benefits of Electronic fund transfer:

1. Reduces time taken to make payments:
Electronic fund transfer is convenient and payment usually gets credited on the same day.

2. Hassle free process:
It reduces the effort taken to transfer funds. There is no need to personally visit the bank.

3. Provides a trail for payment:
All electronic fund transfers leave a trail on their transfer. This makes it easy to access the records from the bank and find out details about payments.

4. Cost effective to transfer funds:
Transferring funds has become very cheap using electronic fund transfers. The transaction costs for NEFT are almost negligible as compared to the time and effort to personally deposit cheques. UPI is a free mode of transferring money.

How does car loan EMI calculator work?

What is a car loan?

A car loan is a loan where the funds are used for purchase of a car. There are three types of car loans:

• New car loans:
These loans are taken to buy a new car. Up to 100% of the value of the car is given out as a loan.

• Pre owned car loans:
These loans are for buying a pre-owned car. Some lenders provide up to 100% finance on the value of pre-owned cars as well.

• Loan against car:
In this type of loan, funds are raised keeping the car as collateral. These loans are like personal loans, which mean there is no condition for use of funds.

Most lenders work out an EMI system for repayment of car loan. Before you apply for any type of car loan, it is beneficial to use an EMI calculator for car loan, which will help you estimate the monthly outgo to repay the loan. Only if your financial capability is good enough to absorb the monthly outgo on loan repayments should you apply for a loan. This can be ascertained from a car loan EMI calculator.

How does the car loan EMI calculator work?

The formula for calculating EMI is:

P x R x [ (1+ R)^ N] / [ (1+ R) ^ N-1]

Where:

P= Principal or loan amount
R= Rate of Interest on loan
N=Tenure of loan in years

The car loan EMI calculator does not display this formula or its calculation. When you input the loan amount, the interest rate and tenure, it shows the monthly outgo or the EMI. Some car loan EMI calculators also show an amortization or repayment schedule for the loan.

The EMI consists of interest on the outstanding principal amount and principal repayment. During the initial period, the interest burden is more and towards the later part of the tenure, the principal repayment is more.

To find out the EMI, you have to input 3 things in the calculator:

• Loan amount you intend to borrow
• Rate of interest for the loan
• Tenure or duration of loan

The best part about an EMI calculator for car loan is that you can change any one input and observe the changes in the EMI. For example, the loan amount can be increased or decreased depending on the model of the car. The rate of interest can be changed depending on the interest charged by the lender. Thus a car loan EMI calculator helps to find out which lender’s loan will be beneficial in terms of EMI outgo.

There are many EMI calculators for car loan available online. Using them is beneficial while planning to take a car loan.

What is NRE account? Its features and benefits

While considering a move abroad, one of the considerations is what is to be done with assets in India. There are strict rules on sale and repatriation abroad in normal course. And if an NRI wants to invest in India, he can’t open a regular savings account to manage spends. For such transactions, an NRI will have to open an NRE account online.

NRE stands for Non Resident External account. An NRE account can be of two types:

• NRE Savings account
• NRE Current Account

An NRE account helps to conveniently repatriate funds abroad. It is also an account to pool in foreign earnings to invest in India.

Features of an NRE account:

1. An NRE account has no restrictions on repatriation of funds. The funds in the account and the interest earned on it can be repatriated at any point of time without any certificates from accountants.
2. This account is maintained in Indian Rupees. The bank where an NRE account is opened will convert foreign exchange into Indian Rupees at the applicable foreign rates.
3. Interest on NRE savings account is paid quarterly on the balance in the account
4. Funds from an NRE account can be transferred to another NRE account for bonafide purposes. It is possible to open an NRO account with the funds in an NRE account.
5. Foreign earnings deposited in an NRE account can be used to invest in Indian assets such as shares, mutual funds, provided the NRI fulfills other requirements.
6. An NRE account can be opened jointly with another NRI. It is not possible to open this account with a resident
7. However, a resident with a proper mandate/letter of authority can manage the NRE account.
8. Funds from sale of assets can be pooled in the NRE account and repatriated after payment of applicable taxes on them.


Benefits of an NRE account:

1. Tax free interest:
The interest earned on an NRE account is tax-free. However, interest may be chargeable to tax in the country the NRI is residing.

2. Easy operability:
Operating an NRE account is very convenient. Most NRE accounts come with NetBanking and PhoneBanking operations. It is even possible to open NRE accounts online.

3. Convenient repatriation:
There are no limits on funds that can be repatriated from an NRE account. The funds that have been brought from abroad and invested can also be repatriated after paying applicable taxes on earnings. The repatriation is done at market exchange rates.

4. Low minimum balance:
The minimum amount to maintain an NRE account is Rs. 10,000. This makes it very convenient to open an NRE account online since the funds required to maintain the account are not huge.

Bank account and its types

In today’s times, having a bank account is one of the essential requirements. A bank account represents funds that an individual keeps with a financial institution with the explicit understanding that these can be withdrawn at any time. A customer can go to the bank at any time and withdraw cash from his account. A bank account also gives customers other services such as direct payments, depositing cheques and drafts to receive payments, drawing cheques to make payments among others.

A bank account can be opened both online and offline. The offline procedure is to personally visit a bank, collect the account opening form, complete the details, and submit the form with the required documents.

The online bank account opening procedure is a lot simpler. Most banks have online forms that have to be filled up, and the relevant documents can be uploaded online. Some banks deliver cheque books and a welcome kit to the customer’s residence in a few days. These days, it is not only private banks, but several public banks also have online bank account opening for new customers.

There are different types of bank accounts that can be opened depending upon the needs of the customer. It is best to find out the features of each account and pick the one that best serves the customer’s needs.

The types of bank accounts are:

1. Savings:
This bank account is usually opened by individuals and hindu undivided families as a place to park their funds. Savings bank accounts earn a nominal rate of interest. These accounts offer fund withdrawal, debit cum ATM cards, cheque processing, and other facilities. Most banks offer net banking facility for savings bank accounts. Savings bank accounts have to maintain a minimum balance. If the minimum balance is not maintained, a certain charge is applied.

2. Salary:
Companies open salary bank accounts for employees who may not have bank accounts. It is also possible to convert a regular savings account to a salary bank account.  A salary account is similar to a savings account, except it has no minimum balance requirements. To make this account attractive for the employees, banks offer employees instant salary credits, phone banking, free internet banking, and other facilities. These facilities and benefits are not uniform and are offered depending on the company that opens salary accounts with the bank.

3. Current:
This is the most popular account for companies and businesses. This account does not restrict the number of transactions in a day. The charges for services on current accounts are lesser than savings account. No interest is paid on current accounts. Businesses can take overdraft facility to help with working capital needs.

7 things to know before getting a car loan

Buying a car is a like a dream come true for many people. With the ease of getting car finance, it is very tempting to buy a more expensive car and service it with a car loan.

A car loan is a loan given by lenders to meet the cost of purchasing a car. The car can be a new car or a pre-owned car. The lenders usually hypothecate the car, which means the car is the security provided for the loan. Even though it is simple to apply for an auto loan, it is better to take this decision after due deliberations.

Here are 7 things you must know before getting a car loan:

1. Which cars do lenders give out car loans for:
Most lenders specify the cars they give loans for. Before applying, it is better to find out whether different lenders are giving loans for the car of your choice. It will save hassles while putting in an auto loan application if you know that the lender approves of the particular car model.

2. Which car would you like to buy:
Choosing a car is not an easy decision. Would you like to buy a hatchback or a sedan? Or put in extra funds and buy a utility vehicle? What is the final use for the car? Once the car is decided, there are different variants and models, which need to be decided. Knowing this will help while applying for car finance.

3. Interest rate:
The most important factor that has to be considered in a car loan is the rate of interest on the loan. Depending on the interest rate, the lender can be picked.

4. Whether you have the capability to repay the loan:
It is important to consider whether you have the finances to repay a car loan. If you are already paying a few EMIs, you should wait till you apply for a car loan. Having adequate income and income certainty is also a factor.

5. Whether buying a new car is beneficial or a pre-owned car:
This is one consideration. There is a huge market for pre-owned cars in India. If you want to buy a car but don’t have a large budget, you can consider purchasing a pre-owned car. Banks give car finance for pre-owned cars as well.

6. Other charges on the loan:
Along with interest, there are other charges such as loan processing fees, pre-payment fees. Before applying for auto loan, you should check and compare these rates from different lenders.

7. Down payment on purchase:
Most car dealerships have down payment facility. This reduces the loan amount and the interest repayments.

3 effective ways to use RTGS payment mode

Real Time Gross Settlement or RTGS is a form of electronic fund transfer in which transactions are settled real time. Each transfer is settled individually which means funds are credited immediately to the receiver’s account.

RTGS transfer is usually meant for high value transactions. The minimum transaction limit is Rs. 2 lakhs per transaction. There is no upper limit for the transactions, although individual banks may set limits depending upon the accounts.

RTGS transfers are processed continuously during RTGS business hours. The window for processing such transactions is from 9am to 4:30pm on weekdays and 9am to 2pm on Saturdays for settlement from RBI’s side. However, individual banks are free to set their timings for accepting an RTGS payment.

RTGS transfer is not available at every bank branch. Before opting for an RTGS payment, it is better for the customer to check that his bank branch and the receiver’s bank branch have RTGS facility enabled. A list of bank branches where RTGS is enabled is available on the RBI website.

One important thing to remember about RTGS payment is that RTGS is settled directly in the RBI’s books. This means the transaction is irrevocable and complete. It cannot be reversed.

There are 3 effective ways of using RTGS payment mode:

1. Internet Banking:
2. Before making an RTGS payment it is necessary to add the recipient as a beneficiary. Usually this process takes 30 minutes to register. To register a recipient, the bank account number and the IFSC code has to be input. Most banks send an SMS confirmation when the registration procedure is done. Following the registration, payments can be made. Banks set limits for payments for the first 48 hours after registration, following which there are no such restrictions for RTGS transfers.

Once the beneficiary is added, it is possible to do an RTGS transfer. Some banks send a One Time Password (OTP) as an additional security measure. Once the transaction is verified, the bank processes the RTGS payment.

3. Branch Banking:
In branch banking, the customer has to visit the branch, and fill an RTGS form. The bank checks the details in the RTGS form and then makes the payment.

The information required to make an RTGS payment is:

• Name of beneficiary
• Beneficiary’s bank and branch
• Beneficiary’s account number
• Amount to be remitted
• IFSC code of the branch.

4. Corporate banking:

Many banks have special channels for corporate customers. Corporate banking facilities provide RTGS transfer to corporates along with facilities like cash reporting, payments information etc. RTGS transfer can be done in bulk on these systems.

Best personal loans in India in 2018

In times of extreme cash crunch, or when funds are needed, one way to quickly avail them is through a personal loan. For funds such as for weddings, home improvements, business expansion, or medical emergency, raising funds through a normal route is time consuming. This is when a personal loan comes in handy.

The personal loan market in India is exploding with several lenders offering loans at attractive rates. Choosing the best personal loan depends on several factors, but the most important one is the lender. Finding a personal loan and a lender that matches your needs is a priority while applying for a personal loan.

The best personal loan depends on the eligibility criteria, the interest rate, the other charges related to the loan. These are the comparison points between different lenders, and not all lenders offer the same terms.

Here are some of the best personal loans in India in 2018:

1. State Bank of India personal loan:
SBI offers personal loans with the least pre-payment charges. They have a wide variety of personal loans available even to pensioners under 76 years of age. SBI’s vast network makes it easy to apply for a loan anywhere in the country.

2. HDFC Bank personal loan:
HDFC Bank offers the facility of instant personal loans. Approval for personal loans is quick. The loan amount can go up to Rs. 25 lakhs for salaried employees and Rs. 15 lakhs for self employed persons. HDFC Bank’s loan has zero hidden charges which makes it very transparent. These personal loans can be completely customized for the applicant.

3. ICICI Bank personal loan:
ICICI Bank offers personal loans at interest rates starting from 10.75%. Loans are disbursed within 72 hours of approval and they charge interest on reducing balance system.

4. Kotak Mahindra Bank personal loan:
Kotak Mahindra Bank’s personal loan is instant with approval in less than 72 hours. This instant personal loan offers interest rate benefits for employees from large organizations.

5. Axis Bank personal loan:
Axis Bank offers the best personal loan for people looking to prepay their loans because they do not have any prepayment charges for their personal loan. They also have liberal minimum income requirements.

6. Citibank personal loan:
This loan is the best personal loan for salaried employees. The interest rate starts from 10.99% for employees of reputed companies. Citibank gives out personal loans up to Rs. 30 lakhs.

7. Bajaj Finserv:
These personal loans are offered only to salaried employees. Bajaj Finserv loans are instant personal loans because approval can be given as quickly as 5 minutes. The loan procedure is entirely online.