You can now get your Credit Report from CIBIL - An important step in empowering borrowers

CIBIL, the only operational Credit Bureau in India, has rolled out a mechanism wherein a borrower can request his/her credit report from CIBIL and dispute any incorrect entries made.

In this article on Apnapaisa.com, the author has detailed the procedure to be followed to obtain one's credit report. I will summarize it below for the benefit of the readers:

1. Fill out this form and send to CIBIL along with (self-attested) Id & address proof and a DD of Rs. 142/- as non-refundable charges. The address to send the forms is:
Credit Information Bureau (India) Limted
P.O. Box 17
Millennium Business Park
Navi Mumbai - 400 710


2. If you find any errors in the report, complaint to CIBIL. The CIBIL will inform the concerned bank and the bank will have to respond within 30 days, otherwise the disputed entry in the borrower's credit report will be deleted.


How the borrowers benefit from this:
1. You can monitor your credit report for any erroneous entries, which up till now wasn't an easy task. Now there is a mechanism also to address the borrowers' concerns regarding erroneous entries.

2. If you plan to apply for a loan and have a very good credit report/rating you can negotiate a lower interest rate.

Link via Apnapaisa.com
Form downloaded from here.
I had previously written about credit reports & CIBIL here.

How to keep your accounts operative?

Some of my friends have faced this problem and you might also have experienced it. When you are away from your home-town say been abroad for a long duration or due to work you shift to a different city but still want to keep your bank account at your home town, the banks may classify your account as inoperative or dormant if there have been no withdrawals/deposits into your account for a specified period.
Sunil has pointed out this RBI Notification which clearly specifies the criteria for classifying an account as inoperative or dormant. I am reproducing the list here for the reader's benefit:

1. Issue of cheque against available balance in the account.
2. Deposit of cheques / demand drafts into the account for clearing.
3. Deposit or withdrawal of cash from the account.
4. Issue of demand drafts by debit to the account.
5. Credits by ECS into the account. Account holder may receive credits from sources like dividend from shares, interest from bonds, deposits, debentures or other securities that may be credited directly to his account by the payer.
6. Credit of interest from any other deposits in force with the same bank or branch.
   
7. Debits against standing instructions.

Please visit Sunil's blog to read this complete blog post where he gives a little background and also suggests ways in which you can prevent your account from becoming dormant.

There is just one more point that I would like to add here in addition to debit to recurring deposits, SIP ( Systematic Investment Plan ) by ECS/Direct Debit in a mutual fund is also one of the ways in which you can keep your account active.

ICICI can deduct money from your salary - WITHOUT your consent

ICICI Bank has modified the credit card agreement wherein they can deduct credit card dues from your salary directly ( by asking your employer to do so ). Any sort of agreement between your employer and you cannot prevent this deduction from your salary.

Although I don't hold any ICICI credit card, this may start a dangerous trend in the Indian credit card industry which will soon be followed by others also.

Just imagine the following scenario:
- You notice a fraudulent transaction on your card. You dispute it with the Credit card company.
- The Credit card company ( i.e. ICICI Bank ) does not agree with you and decides to charge you.
- They instruct your employer to deduct the money from your salary. You CAN'T stop it.

Or a second scenario:
- Usually private credit card companies delay cheque payments by 4-5 days so that they can charge you for late payments.
- Nowadays you can get these charges reversed after some negotiation with the customer care.
- But after this rule is implemented, the bank can directly deduct such fees ( like late fees ) from your salary. The Bank does not have to negotiate with you.

Remember this clause in the card member agreement has been inserted by a Bank which had introduced a rule in the year 2003 stating that more than 3 cash transactions at the home-branch will be charged. They of course had to take back such restrictions on RBI directions.

If I held an ICICI card, I would have immediately cancelled it citing this change in agreement as the reason. If ICICI card holders cancel their cards in sufficient numbers, other credit card companies won't dare to make such changes to the card agreement. Also, if money is deducted from your salary for wrong reasons by the credit card company, I will suggest you first approach the RBI Ombudsman and then Consumer Courts. Lets see if this rule can stand in a court of law.

Customer (dis-)service?

Here I list down the kind of customer experience that me and my friends had with different organisations. This list is not comprehensive, do comment about your own experience with different banks/insurance companies and other organisations.

Computer/network is down: The most common excuse in public-sector banks. Many times when you are in a hurry, this excuse pops-up. I'm not saying that the bank personnel are lying or are being lazy. My point is what's the point of computerisation, if they can't get it working? This is a recurring problem. They should better get back to hand-written ledgers if their computers/networks don't work when needed.

You will receive it within stipulated time: This mostly comes from private banks. Say you had requested a cheque book or DD to be delivered to your home address. Usually it arrives in your home with 4 days of submitting the request, but this time has not arrived even after 7 days. If you try to complain to the bank personnel/phone banking, they will give you a blunt reply that you should wait for 15 working days. They won't bother to check with their central processing centre if your request has been processed and the item despatched by courier/post.

Something similar has been my experience with one of the movie rental service. Their customer service desk works from 10 AM to 7 PM. And their official movie delivery timings are from 10 AM to 10 PM, but the delivery boy usually comes to my apartment around 12 PM. Some day when the delivery boy hasn't come even by 2 PM and you try to enquire with the customer care they will give you a blunt reply that the delivery timings are from 10 AM to 10 PM. If you try to complain around 6:30 PM, they give the same 10 AM to 10 PM excuse. But their customer care closes at 7 PM and if you try to complain about the non-delivery of movie the next day they would reply that the door was locked when the delivery boy arrived. Given the fact that movie rental's customer care closes at 7 PM, then how is the customer supposed to prove that the delivery boy infact did not come.

SBI-specific complaints: I believe if we do a survey SBI( plus its associates ) may top the list of number of customer complaints. This may also be due to the fact that it is the largest bank in the country.

State Bank complaint no. 1: If you ever try to open an account in SBI or its associate banks, they would compulsorily give you a Debit card whether you apply for it in the account opening form or not. I mean if somebody has specifically marked in the account opening form that he/she does not need an ATM/Debit card then why is a card issued at all? Does the branch has some targets to achieve regarding the number of debit cards issued? Anyway SBI debit card is not a free service then why is it forced on everyone even though they may not need it.

State Bank complaint no. 2: Fine, you will say it does not matter if you got the card, you can always get it cancelled. Thats what the second complaint is about. You get the SBI debit card cancelled but the charges for the card will continue to be deducted from your account every year. You have to request the branch every year to reverse the debit card charges. If you ask the manager why are the charges being levied inspite of cancellation of card, he would blame it on the software. Being a software engineer myself, I am ashamed of such computer/software engineer who can't configure the system to stop deducting charges for cancelled debit cards. Or is it a ploy by the SBI ( & associates ) management to increase their fee income while taking shelter in the excuse of software limitation.

IOB-specific complaint: Indian Overseas Bank have a partnership with Oriental Insurance for offering personal accident insurance to their customers for which they deduct premium from the customer's account. By default they have made all their customers part of the scheme without the customer's consent. They don't care if the customer already has a personal accident insurance policy and does not need any additional insurance cover. And if you ask the branch personnel to stop this insurance facility and reverse the charges, they would smilingly reply "Its just Rs. 10/-". Rs. 10/- or Rs. 10 Lac whatever it is, it my hard-earned money and if I don't need the facility I don't pay for it. This is another trick by the bank's management to increase their fee income.

ATM usage is free, so now we charge you for Fund transfer

As I had blogged earlier, thanks to a RBI notification transactions done at all ATMs across India are free of charges ( i.e. no charges for using other bank ATMs within India )

But now HDFC Bank has decided to charge for NEFT ( National Electronic Fund Transfer ) henceforth at the rate of Rs. 5 plus taxes for every transaction. This may have something to do with RBI's decision not to waive off charges after March 31,2009. Also Rs. 5 was the upper limit for charges specified by the RBI for transactions not exceeding Rs. 1 Lakh.

Similarly Axis Bank has introduced some security features to use NEFT facility online for which they will charge an annual fees. But most of these security features like code on SMS are offered free of cost by other banks like ICICI & Citibank. Then why does Axis Bank has to charge for a security feature which is provided free of cost by other private banks which have similar AQB requirements? And you can't use NEFT online with Axis Bank without having these security features so there is no other option to the customer than to pay.

Also HDFC Bank by levying charges for NEFT fails to understand that Indian customers are very price sensitive and even if 25% of the transactions which happen on NEFT presently shift to cheques then their work will increase manifold. Since processing of cheques requires human intervention & lot of paper work but NEFT processing is almost completely done by computers.

I believe HDFC Bank is taking a chance here, they are waiting to see the response of their competitors and customers. If their competitor ( read ICICI Bank ) also decides to levy charges for NEFT then all other banks will also follow suite. ICICI Bank also charges for NEFT now i.e. Rs. 5+ tax for less than Rs. 1 lac and Rs. 25 + tax for more than Rs. 1 Lac.The days of no-charges NEFT for bank customers are over :(

How I chose a Savings Bank account

I had wished to title this post as "The best Savings Bank account", but then I realized one size does not fit all that's why I am going to tell you how I went about choosing a savings bank account for myself. My criterion may or may not suit you.

Well, my search for a Savings Bank account began with 3 criterion in mind:
1. Debit Card: Free for life, specially no annual fees.
2. Debit Card: facility to use at all ATMs without any charges.
3. If possible, payable-at-par cheques all over India.

ICICI was immediately ruled out because at that time they didn't offer any account with zero annual fees for debit card ( except for senior citizens ). Most public sector banks ( except SBI and its associates ) had a non-existent ATM network. SBI and its associates offered ATM cards , but were loaded with annual fees. Axis bank too had annual fees for Debit Card.

But when I had a look at HDFC Savings Plus account, it looked like it was tailor-made for me. No annual fees for Debit Card, plus the facility to use the Debit Card at other bank ATMs without any charges ( 5 times in a month ). Additionally the payable-at-par cheque facility was also there. All I had to do was maintain a AQB of Rs. 10,000/-
And so I chose HDFC Savings Plus account.

After that RBI came out with circulars which made life much easier for me. As per RBI's instructions starting April 2008, there are no charges for balance enquiry at other bank ATMs throughout India and from April 2009 there are no charges for cash withdrawal as well. So if you want to cut down on your Debit card charges just make sure that its annual fees is zero which means:
1. You get your Debit card free for lifetime.
2. Also starting April 2009 you can do balance enquiry and cash withdrawal at all ATMs in India without any charges ( Thank RBI for the circular ).

Nowadays many banks offer savings account with free debit card. Some of them are ICICI Gold and Titanium privilege account, Kotak Mahindra Bank's Ace and Pro accounts, HDFC's Savings Plus and Savings Max account and South Indian Bank's Privilege Savings account.

Savings Tip: Quartelry Income Scheme

Post Office Monthly Income Scheme ( MIS ) is very popular among the masses, especially those retired.

Its features are:
1. Monthly income at the rate of 8% per annum + 5% bonus on maturity (which works out to be an effective yield of 8.9% )
2. Income is taxable, but no TDS.

Some of its disadvantages are:
1. Interest rates are not in-line with the market rates. As recently as October-November 2008 when banks were offering more than 10% on fixed deposits, the MIS interest rate was still 8%
2. There is a ceiling on maximum investment.It is rupees 3 lakhs for a single account.
3. Cumbersome visits to the post office and sometimes you have to face long queues ( although this can be resolved by following one of my previous post )
4. Restrictions on pre-mature withdrawal. You cannnot close an MIS account before 1 year.

All the above disadvantages can be overcome by employing the Quarterly Interest option offered by Bank FDs. Usually when customers open a fixed deposit ( FD ) with a bank they go for the cumulative option where interest keeps on accumulating and is paid out only on maturity. Instead they can go for a quarterly interest option FD where the interest is calculated and paid out quarterly. Most banks ( public & private ) offer this option of quarterly interest payout, which can also be credited to your bank account.

With a litte bit of self-discipline you can use this Quarterly interest option as a replacement for MIS. Some banks also offer the monthly interest payout FDs but the interest rate on such FDs is usually lower ( by around 0.5% ).

Let's see how we have overcome the above disadvantages of PO MIS by replacing them with Bank FDs:
1. The interest rates are in line with the market rates. If the interest rates in Banks are higher than POMIS, it makes sense to go for Bank FDs.
2. No upper limit on investment.
3. Interest can be credited to your bank account directly.
4. No restrictions on pre-mature withdrawal. You can break an FD whenever you wish to.

Tax-treatment is same as MIS, except for the fact that TDS is applicable.

Savings Tip: Save on service charges

With airfares becoming unaffordable once again and new airports under development in different cities charging UDF ( in addition to the already high fares ), we middle-class people will have to rely on our "garib rath" the Indian Railways.
Thankfully, now IRCTC offers online booking facility for train tickets and you don't have to stand in queue for hours to get a reservation ticket. But this facility comes with some additional charges ( obviously! )

When you buy a ticket from IRCTC, there are 3 costs that you incur:
1. The ticket fare and reservation cost ( this goes to the Indian Railways )
2. The IRCTC commision ( depends on the class for which ticket is booked, for Sleeper it is Rs. 10 and for Third AC is it Rs. 20 and so on. IRCTC also pays some service tax out of this, but that is not relevant here )
3. The service charges payable to the payment gateway/bank.

We cannot do anything about the first two costs, but the third one depends on the bank you use to make the payment.
Let's have a look at the service charges of different booking for train ticket booking. Go to IRCTC Terms & Conditions and scroll down to section 2.1

This section is divided into two parts:
- Payment by Credit Cards
In this section you will notice that almost all payment gateways charge around 1.8%, but the Axis Bank payment gateway charges only 1.65%
So when paying by Credit Card, you can choose Axis Bank payment gateway for lower charges.
Update 1: A reader has faced problem with Axis Bank with respect to refunds, and he advises not to use Axis Bank payment gateway.

Update 2: Chinmay Shah has suggested to use Kotak Credit Cards for railway ticket booking. Kotak Credit Cards have the facility of railway surcharge waiver which means no payment gateway charges for Kotak Credit Cards. I'm not sure about the annual fees and other charges of Kotak Credit Card, so do check them out before getting yourself a Kotak Credit Card.

- Payment by Direct Debit
Most of the banks, charge a constant amount ( 10-11 rupees ) but there are some who don't levy any charges. These banks which don't levy any charge are much better than any credit card payment gateway, as the third cost ( in the list above ) is zero now. The list of banks which don't charge any amount for payment by Direct Debit are:

• Bank of Punjab
• Punjab National Bank
• ABN-Amro Bank
• Federal Bank
• Syndicate Bank
• IndusInd Bank
• Karnataka Bank
• Bank of India
• Bank of Baroda

So, if any of these Banks are near to your house, do consider having an account in them with Internet banking facility. Then you can book railway tickets through internet without paying any service charges to the Bank. I personally use Punjab National Bank and till now I haven't faced any issues with its Internet Banking site.

Savings Tip: Flexi RD

Everyone must be aware of RD ( Recurring Deposit ) wherein you deposit a fixed amount of money every month which accumulates into a large sum ( along with interest earned ) over long term ( usually 3-5 years ).

I would like to tell you about another innovative product offered by some PSU Banks which, although known by different names in different banks, I would call as Flexi RD (FRD). I am not aware of any private bank ( like ICICI, HDFC, Kotak Mahindra etc. ) offering such a product. Let me know if any private bank offers it.

Let's have a look at its features:
1. Period of deposit can be chosen at will. But some banks have fixed tenures ( of say 3 years ) for such flexi RD schemes.
2. Rate of interest is the same as that offered for a fixed deposit of the same duration.
3. The monthly deposit can be upto 10 times the initial deposit. Let me try and explain this with an example, say your first installment was Rs. 500/-
Subsequent deposits in the FRD have to be a minimum of Rs. 500/- and maximum of Rs. 5000/- i.e. you may choose to vary the deposit amount provided it remains within the maximum and minimum limits for such deposits
Eg. 1st month - Rs. 500/-
2nd month - Rs. 2500/-
3rd month - Rs. 1000/-
4th month - Rs. 3000/-
5th month - Rs. 5000/-
6th month - Rs. 4500/- and so on.

4. Each of your deposits will continue to earn the same rate of interest, which was decided at the time of account opening.

Now let me explain how you can use FRD to your benefit:
- Open a FRD account in the bank paying a small amount as the first installment. This first deposit must be an amount that you can comfortably pay every month without putting any strain on your finances. For somebody earning a salary of 20,000/- to 30,000/- , an amount of Rs.500/- would be decent enough to start an FRD.
- Open the account somewhere around the end of month ( preferably after 25th ) so that the deposit due date falls near the end of the month. I will tell you the reason for this later.
- Since your initial deposit was Rs. 500/- your limits are as follows:
Minimum : Rs. 500/-
Maximum: Rs. 5000/-
Towards the end of the month, you may have some amount left in your salary account which you can deposit in this FRD account ( only subject to the limits above ). Months during which your expenses are higher, you just contribute the minimum of Rs. 500/- , but during months when your expenses were lower you could deposit a higher amount to FRD account.
Thus, by depositing a flexible amount every month over a period of 3-5 years you will amass a substantial amount on maturity.

Above were listed all its advantages, but I would advise you to keep the following also in mind:
1. The interest earned in FRD is taxed as part of your income (similar to a fixed deposit )
2. Liquidity may be a concern, some banks may not allow pre-mature withdrawal from FRD accounts before maturity ( or may place some other restrictions ). So don't keep your emergency funds in a FRD account.
3. If you happen to be out of town for some time, please make sure that some arrangements are in place to pay the FRD installments in time. Otherwise the bank may levy some fine. This isn't a major concern with PSU Banks, since charges levied by PSU banks still aren't that high.

I would list list below the names by which it is known in some banks:
1. In Corporation Bank it is known as Corp Recur which has a fixed tenure of 3 years.
2. In UCO Bank, it is known as Lakshmi Yojana
3. In Punjab National Bank it is known as Swecha Jama Yojna

Please comment below, if you were already aware of this scheme and the different names by which it is known in different banks.

Leaders & Laggards among Public Sector Banks

With the era of new age banking dawning, the PSBs ( Public Sector Banks ) have also woken up from their slumber. They have finally woken up to technology-enabled banking. Some have taken the lead, others lag:

State Bank of Patiala (SBP) - First PSB to have all branches CBS-enabled. Yes, you read it right every branch of SBP even in the tiniest of villages is CBS (Core Banking Solution) enabled, which means that you can operate your account from any of its branches. Although this would cease to matter anymore, since SBP is going to be merged with SBI.

Corporation Bank (Corp) - In terms of technology adoption, Corp has always been the leader. Whether it is internet banking, debit cards or the recently introduced mobile-commerce, it has always been the first PSB to adopt it. Even the website of this Mangalore-based bank looks decent enough ( better than most PSBs including SBI ).

Karnataka Bank & Andhra Bank - Not to be left behind are these two banks from the South, who have a decent network of ATMs and CBS branches ( atleast in the South and are trying to expand in the North India as well ).

Punjab National Bank (PNB) - Most ( if not all ) branches of PNB are CBS-enabled and one good thing about PNB is that account-holders at a CBS branch by default get a payable-at-par cheque book. Though they have been a laggard on the ATM front. I haven't seen many of their ATMs other than at branches. They have a tie-up with Geojit for providing depository and trading services.

State Bank of India (SBI) - SBI has stepped into so many domains at the same time that it has become almost unmanageable ( atleast for its branch managers ). SBI ( along with its subsidaries ) does have the largest network of ATMs in the country. Recently they have introduced the concept of 3-in-1 trading account in partnership with Motilal Oswal.

UCO Bank & Union Bank of India - After being in financial trouble for few years these two banks have not only improved their balance sheet positions but their services as well. UCO Bank has been rapidly expanding, opening up new branches. You can find ATMs at almost all of their urban branches.

Among the PSBs which haven't shown any willingness to upgrade, Indian Bank tops the list. Its branches, still give you that feeling of a dingy government office (the image which is normally projected in hindi movies).

Hope some day our PSBs would be able to measure upto the services offered by the international banks [ but should not measure upto their charges ;-) ].

Update : Karnataka Bank is not a PSU Bank. Thanks Narsi!

I pity the SBI Manager

With SBI ( State Bank of India ) distributing their Insurance, Credit Card and Mutual Fund products through their wide network of branches, as well as modernizing their banking operations ( offering facilities like Internet Banking, Debit Card etc. ) life has become a lot easier for all but one group of persons.. the managers of SBI branches.

At an SBI branch
- if you need Internet Banking password, you need to approach the Manager.
- Applying for SBI Debit Card? submit the form to the Branch Manager.
- Want to purchase Mutual Fund units? Approach the Manager.
- SBI Life Insurance products? Approach the Mananger.

All this over and above his ( Manager's ) existing responsibilities ( which includes attending to their High Net-worth clients ).

All this, leads to a scenario, where there is always a long queue of people waiting outside the Manager's cabin. This is unlike other banks ( public or private sector ), where there are dedicated personnel for each of these products ( viz. Mutual Funds, Insurance, Cards etc. )
Perhaps, SBI can do a little favour to their managers ( and their customers as well ! ) by implementing a system similar to the other banks.

Citibank - Not safe

Would you place your most precious item in care of somebody who is careless, reckless and cannot take care of his/her own items?

Well its the same with Citibank. It has always been in deep trouble with respect to its finances. If they can't manage their own, then how do they expect to manage your money ( call themselves a bank!! ).

When Citibank was in deep trouble in 1990s, the Saudi prince Al-Waleed rescued it by buying a substantial portion of it and pumping in the much-needed capital.
Now with the sub-prime bubble bursting, it is finding itself in troubled waters again. Who would rescue it now?

The lesson for you, don't keep your life savings with Citibank. Keep it in one of the Indian banks where the deposit is atleast guaranteed by the Deposit Insurance and Credit Guarantee Corporation DICGC ( upto Rs. 1 lakh ). The Citibank deposits are not guaranteed by DICGC, while most other banks' deposits ( including ICICI and HDFC ) are guaranteed by DICGC.