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EMI Loan Moratorium – Interest Waiver Cashback from Bank

Home Loan

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October 25, 2020

EMI Loan Moratorium – Interest Waiver Cashback from Bank

You must be aware that the government has announced a loan moratorium from 1st March 2020 to 31st August 2020. Loan Moratorium was announced amid the Covid-19 pandemic. The government has announced major relief to all borrowers which is interest waiver or cashback benefit. This benefit applies to all borrowers irrespective of those who have opted for loan moratorium or not.

This benefit is given to all individual borrowers and small businesses with a loan amount of up to 2 Cr. The entire interest for six months would be waived off. If the borrower has already made a payment cashback will be issued for the interest amount. The benefit is announced by the finance ministry considering the fact extreme hardship is faced by the people due to the Corona pandemic.

Let’s look at the detail of the Interest waiver and cashback benefit announced by the government of India.

Interest Waiver & Cashback Scheme – Mar 2020 to Aug 2020

This scheme shall be called “Scheme for grant of ex-gratia payment of difference between compound interest and simple interest for six months to borrowers in specified loan accounts.

The said benefit applies to the loans below 2 Cr across the following loan categories. Any borrower whose aggregate of all loan amount is above 2Cr will not be eligible for this scheme.

MSME Loans
Education Loans
Home Loans
Automobile Loans
Personal & Professional Loans
Consumer Durable Loans
Credit Card Dues
Consumption Loans

The lending institute should be a public sector bank, banking company, co-operative banks, regional, rural banks, All India Financial Institution, non-banking finance institution, housing finance company, or microfinance institution.

Key Features of Interest Waiver Cashback Scheme

The scheme will credit the difference between compound interest and simple interest for a period of six months.
The interest rate applicable will be as per loan agreement in case of home loan, education loan, automobile, personal and consumption loans. The interest rate would be as per Feb,2020. Incase rate of interest is changed thereafter; it shall not be considered for computation.
The credit card dues interest rate would be as per weighted average lending rate for the transactions financed on EMI basis. Penalty or penalty interest rate would not be considered.
For cash credit, simple interest would be calculated on daily basis as on Feb, 2020. Compound interest rate would be calculated on monthly basis.
The lender will credit the difference between compound interest and simple interest by 5^th November,2020.
Grievance redressal mechanism for the entire process would be established. The responsibility is centrally assigned to SBI.
Lending institute needs to claim reimbursement at the central government. The claim to be lodge latest by 15^th December, 2020. The claim is subject to audit.

Calculations

The benefit is applicable to all loan borrower irrespective of borrower had fully availed, partially availed or not availed moratorium facility.

Let’s try to understand this by example.

Suppose borrower has taken a home loan of 50 Lakh. The simple interest on the loan amount would be 4 Lakh per annum considering 8% interest rate.

The six monthly simple interest would be 2 Lakh and outstanding with compound interest would be Rs.212425. So, total benefit in this case would be Rs.12425.

Simple interest amount from above 2 Lakh would be paid by borrower. Rs.12425 Compound interest would be paid by the government.

Take away

It is a welcome step by the government. This step would help borrowers in the bad times especially to new borrower where interest burden is more compared to principal component. In the moratorium, the government has deferred payment of EMI for six months. This means borrowers were liable to pay interest and interest on interest. However, now only interest amount to be paid compounding interest will be paid by the customer. The liability is slightly reduced for the customers.

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Credit Card EMI Offer – Should you opt?

Credit Cards

Shitanshu Kapadia

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October 22, 2020

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Credit Card EMI is a facility that allows you to purchase big items on EMI. You need not spend the entire amount from your pocket in a single go. The entire amount will be divided into equated monthly installments and paid on a monthly basis. You require a credit card to opt for this facility.

Festival season has started and many companies are offering credit card EMI facilities. So, if you are facing a cash crunch you can opt for this facility. Recently when I was planning to purchase a refrigerator, I came across a similar offer in Samsung Double Door Refrigerator. The offer was to opt for Credit Card EMI and get a cashback of 10% after 90 days. In the first instance, it seems to be a lucrative offer. But I decided to do calculations before opting for this offer. When I did the calculation the actual picture was cleared.

When you opt for Credit Card EMI offer you need to pay the interest rate on the amount borrowed. In my case, it was 13.99% – per annum. So, with the principal and interest amount the amount comes out to be higher. However, with a cashback offer of 10%, it was a beneficial affair.

After going through this purchase experience I decided to share my story and credit card EMI calculation with you. The main objective is to help you in making an informed decision while buying a product with an EMI option.

What is Credit Card EMI?

Credit Card EMI means converting the entire bill into EMI. This option is available on selected purchases for a limited period only. It is one type of loan offered on large value purchases. This loan needs to be paid in EMI. The credit card EMI contains both the principal and the interest component.

In case you decide to opt for this scheme, the credit card EMI option to be selected by the retailer while swiping the card on the POS.
At the same time, you need to make choice about EMI tenure. You can opt for 3 months, 6 months, 9 months, 12 months, or 24 months EMI options.
The rate of interest in this option is usually lower than the credit card interest rate. It will be decided by the credit card company.
Once you have opted for this facility, your credit limit will be reduced by the bill amount. Every month you need to pay EMI.
Prepayment or closure facility is not given in most of the cases. In some cases, you need to pay processing fees also.

These types of schemes are offered in collaboration with the vendor or merchant.

Also Read – What is Pre EMI? – Pre EMI vs Full EMI Difference

Types of EMI Offered by Banks

Three types of EMI facilities are offered by credit card companies. Zero Interest rate EMI, low interest rate EMI, and Credit card EMI with cashback. In Zero Interest rate EMI, no interest is applicable. On Low-interest rate EMI, the applicable interest rate is lower compared to credit card interest rates.

#1 Zero Rate EMI

Zero Rate EMI is an option where the loan is offered with a zero rate of interest. In this option, the credit card company does not charge anything extra and does not earn anything from you. This option is given to selected customers only. It is advisable to go for the Zero Rate EMI option.

#2 Low-Interest rate EMI

Low-Interest rate EMI option is offered with a lower rate of interest. The interest rate range in this option is from 13% to 22% per year which is lower compared to credit card interest. You can not make a pre-payment in this case. If you do prepayment you need to pay an additional penalty.

#3 Credit card EMI with Cashback

Under this option credit card EMI facility is offered at a lower interest rate. Along with EMI, you will get a cashback facility. The cashback amount is offered by the respective merchant or manufacturer and not by the bank or credit card company. Cashback will be credited after 90 days of doing the transaction.

Credit Card EMI facility – Calculation

Let’s take an example and do a calculation for the Credit Card EMI facility. Mr. Suresh holds an ICICI Coral Credit card with a credit limit of 1.25 Lakh. He has a requirement to purchase a Smart TV. He opts for Smart TV with a Credit card EMI Facility with 6 6-month EMI option. TV cost is Rs.49000. On the other hand, Mr.Ramesh does not hold any credit card. He also makes a purchase of the same Smart TV by making a one-time payment using a debit card. Another person Mr.Mahesh also holds a credit card and he opts for a credit card EMI with a cashback facility of 15% on the same TV.

Calculation –

	Credit Card EMI (Suresh)	Debit Card (Ramesh)	Credit Card EMI with Cashback (Mahesh)
TV Cost	48331	48331	48331
Interest rate (13.99%)	3380	Nil	3380
Swipe Charges	858	Nil	858
Total	52569	48331	52569
Cashback	Nil	Nil	7249.65
Total Payout	52569	48331	45319.35

From the above calculation, we can clearly say that the debit card option or EMI with Cashback option is beneficial.

Pros

No need to pay money upfront. It will be a deferred payment.
Zero Cost EMI option is available for the customers.
The rate of interest is lower compared to credit card interest.

Cons

You need to pay the principal and interest amount.
A credit limit will not be reduced until the time you pay your dues.
In some cases, you need to pay processing costs or swipe charges.

What you should check before opting for the EMI option in a Credit card?

Interest Rate

You need to check for the applicable interest rate. The rate of interest should be low. If required go for low tenure 3 months for 6 months.

Swipe Charges

Another point to check is swipe charges. The swipe charge or processing fee should be NIL or as low as possible.

Prepayment Facility

The credit card company should provide a prepayment facility for this option. Pre-closure charges should be low or NIL.

Is it advisable to opt for a Credit Card EMI Facility?

The answer to this question is purely based on your financial condition and the offer on hand. If you are not in a position to pay upfront money but you have future visibility that you will get money at regular intervals you can go for this facility. Another reason for opting for this facility could be a discount offer or Cashback.

Note – If you opt for this facility make sure that you clear your dues on time.

Once in a while opting for this facility is ok but it should not become a habit while buying any big-ticket items.

Saral Jeevan Bima – New Term Insurance Guideline by IRDAI

Life Insurance

Shitanshu Kapadia

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October 17, 2020

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Saral Jeevan Bima – New Term Insurance Guideline by IRDAI

Saral Jeevan Bima – Term Insurance – Term Plan is a widely accepted product. However, terms and conditions of the term plan offered by different insurance companies are different. Every company was introducing innovative products with different features, options, and riders.

Different term plans with different features are creating confusion among customers. It is extremely difficult for the customer to compare policy features and take a buying decision.

To help customers IRDAI has issued a new guideline for the term insurance policy. This guideline is for standardizing terms and conditions of the term plan. It will be called Saral Jeevan Bima. Saral Jeevan Bima will be a standard term plan with simple features and standard terms and conditions.

It is a welcome step by IRDAI. This step will make the life of the customer easier. It will enhance trust between the insurance company and its customers. This step will also help in preventing the mis-selling of insurance policies. Before this IRDAI has released a guideline for standardizing terms and conditions for health insurance policies – Arogya Sanjivani.

Here is detail guideline announced by IRDAI for standard term insurance – Saral Jeevan Bima.

Saral Jeevan Bima – New Term Insurance Guideline by IRDAI

The standard term insurance plan shall be called “Saral Jeevan Bima”. All insurance policies will prefix Saral Jeevan Bima before the product name.

It will be a non-linked and non-participating pure term plan which will cover the risk of individual life. No additional saving or investment component will be attached to this plan. This term plan guarantees payment of sum assured to the nominee, incase policy holder’s die during the policy term.

Only specific riders can be offered. No additional benefits, options, variants shall be offered to the policyholder. No exclusion is allowed under this policy except suicide exclusion. This policy shall be offered to individuals without any restrictions on gender, place of residence, travel, occupation or educational qualifications.

The terms and conditions document of Saral Jeevan Bima would be standard. Key Features and other parameters of this plan as per IRDAI guidelines are given below.

Sr. No.	Description	Features
1	Entry Age	18 years to 65 years
2	Policy Term	5 years to 40 years
3	Maximum Maturity Age	70 years
4	Sum Assured	Minimum 5 Lakh to Maximum 25 Lakh* (SA would be allowed only in the multiple of Rs.50000) *Insurers have the option of offering Sum Assured beyond 25 Lakh under Saral Jeevan Bima with all other terms and conditions remaining the same.
5	Premium Payment Options	Single Premium – Lump sum Regular Premium – Monthly, Half Yearly & Yearly Limited Premium Term for 5 years and 10 years
6	Death Benefit	For Regular & Limited Premium Payment policies: Highest of: – 10 times of annualized premium; – 105% of all the premiums paid as on the date of death; – Absolute amount assured to be paid on death. For Single premium policies: Higher of: – 125% of single premium; – absolute amount assured to be paid on death.
7	Maturity Benefit	None
8	Exclusions	Only suicide clause
9	Waiting period	45 days from the date of commencement of risk. In case of revival of Policy, the Waiting Period shall not be applicable. The following words shall be prominently displayed in BOLD, on the welcome letter of Policy Document as well as on the first page of Sales Literature. “This Policy will cover death due to accident only during the waiting period of 45 days from the date of commencement of risk. In case of death of the life assured other than due to accident during the waiting period, an amount equal to 100% of all premiums received excluding taxes, if any, shall be paid and the Sum Assured shall not be paid.”
10	Surrender Value	Surrender Value is not applicable under this Policy.
11	Policy Cancellation Value	Policy Cancellation Value shall be payable: – Upon the Policyholder applying for the same before the stipulated date of maturity in case of Single Premium Policy; – Upon the Policyholder applying for the same before the stipulated date of maturity or at the end of revival period if the policy is not revived, in case of Limited Premium Payment Policies. The amount payable shall be calculated differently in single premium and limited premium policy. For regular premium policy no cancellation value shall be payable.
12	Loan	No loan will be offered against the policy
13	Optional Riders	Accident Benefit and Permanent Disability Benefit Riders

The policy guideline suggested above for the term plan Saral Jeevan Bima shall be applicable from 1^st January, 2021.

Take Away

It is a very good step by IRDAI. This step is likely to give the following benefits.

As the terms and conditions of a term plan are standard, it is likely to increase term insurance adoption across India.
The policy premium of this plan will be low as sum assured under this policy is restricted to 25 Lakh.
As it is an affordable policy lower-income group will also purchase Saral Jeevan Bima.
Suggested Features and Benefits of this policy is really Saral (Simple) and easy to understand.
As it is a standard product and governed by the guideline of IRDAI, the chance of mis-selling and disputes at the time of claim settlement will be low.

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Groww Online Demat Trading and Direct Mutual Fund Platform Review

Mutual Funds

Shitanshu Kapadia

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October 15, 2020

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Groww Online Demat Trading and Direct Mutual Fund Platform Review

Groww is a leading online demat trading and direct mutual fund investment platform. Groww has more than 9 million user base. Groww provides an investment platform free of cost. This means you can invest in mutual funds and equity without transaction or subscription charges. If you are a newbie or beginner and exploring an online discount broking platform you should consider Groww in your evaluation. Groww provides a fast, easy, and transparent online platform on the website as well as app. Here is a complete review of Groww.

Groww Review

Groww is easy to use investment platform trusted by millions of Indians. Groww is using the latest technology and provides a lightning-fast trading experience. They also claim that data stored on their platform is fully encrypted and secured. Key Features of Groww are given below.

Groww Key Features

Investment in Direct Mutual Funds, Stocks, Fixed Deposit & Gold
Free Investment – No Transaction Charges, No Subscription Charges
Facility to Invest in US Stock Market
Anywhere anytime access
35+ Mutual Fund Partners
Easy to use and Lighting fast platform
IPO Investment Facility
Trading facility with Intraday and margin
eNACH to automate SIP facility
Digital Gold and Gold ETF investment facility
Charting tool facility
Dashboard view with real-time market data update
Few Order placement steps

Groww Charges

Groww is a free platform that provides equity delivery free of cost. However, for an intraday order, you need to pay charges. Brokerage Charges of the Groww platform are given below. Please note that Groww is not providing a commodity trading facility.

Also Read – 10 Best Mobile Trading App in India

Groww Brokerage Charges

Description	Charges
Equity Delivery Charges	Zero
Equity Intraday Trading	20 Rs per Order
Equity Future Trading	20 Rs per Order
Equity Options Trading	20 Rs per Order
Currency Future Trading	20 Rs per Order
Currency Options Trading	20 Rs per Order
Minimum Brokerage	Zero
Margin Money	Zero
Commodity Trading	NA

Groww Demat Account Opening Charges

Account Opening Charges – NIL

Demat AMC Charges – Rs.300 per annum

Trading AMC Charges – NIL

Groww provides free account opening facility. Trading AMC charges for the Groww is also NIL. You have to pay Rs.300 per year for Demat AMC charges.

How to Open Demat Account at Groww?

The step by step process of opening a Demat Account at Groww is given below.

Visit https://groww.in and click on Login/Register Button.
You can enter your email address or click on login with Google (if you have a google account)
Now you need to provide your mobile number for verification.
You will be sent with OTP for mobile number verification.
Now, you need to provide your PAN card data.

Once your PAN card data is verified you need to enter the date of birth, gender, and other information.
You also need to provide Aaddhar Number as well as one passport size photograph.
Next step is providing your bank information along with IFSC code. Once you are done with that you need to digitally sign the form before submitting it.

The process of activation of your account will take 2-3 days. All given information by you will be verified and your account will be opened. Your login details will be shared to you on your email address.

Groww Mobile App – Trading Platform

Groww Mobile App is a user-friendly app that is easy to operate. It provides a dashboard view for tracking all your investments. UI of this app is very simple and any millennials can easily operate this app. The information provided on this platform is free and easy to understand.

You can invest your money using this app with a few clicks. You will get real-time notifications.

KYC via this account is paperless and happens with a click of a button. You can get a mutual fund SIP calculator to get an idea about estimated returns. This app also provides the facility of single-click buy/sell shares.

This app also offers beautiful visualization and charts including price movements, historical performance. The information given on the app will help you to take an informed decision.

You can also get complete stock analysis with company financials, balance sheet and P&L statement on the app.

Pros

Free investment platform
Flat rate of trade of any volume
Facility of doing transactions on web as well as application
Excellent use of technology
Platform is very fast and provides multiple investment option
Direct mutual fund investment facility
Very good customer support services

Cons

Commodity Trading not available
No Forex Facility available at Groww platform
Insurance facility is not available at Groww platform
3-in-1 Account not available
Stock Recommendation facility not available
No Robo Advisory Facility

Final Takeaway

Groww is an excellent platform that provides direct mutual fund, equity, and trading facility. A Technology-enabled fast platform is a plus point for the Groww. The application provided by Groww is extremely good.

In short, Groww is becoming popular due to features, benefits, free, and faster services.

Have you opened an account with Groww?

Do share your experience in the comment section given below about Groww Review.

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