18 Banking and Loan Consumer benefits

Here is a list of 18 changes that have taken place in the banking space:

Savings Bank Account Interest: By calculating interest on savings bank balance on a daily basis from April 1, 2010, accountholders stand to gain on what they earn on the balance. The RBI also deregulated interest on savings bank account balance in October, 2011, paving way for interest rates to be higher than the threshold rate of 4 per cent that many continue to offer as the basic rate. Further, since March this year, RBI has mandated banks to credit interest of savings accounts on a quarterly basis or at shorter intervals.

Automated Teller Machine (ATM): ATM was introduced in India by HSBC way back in 1987, but it took off in a big way towards the turn of the century with Citibank and ICICI being the prime movers before all the other banks started to offer ATM facilities. Initially, ATMs continued to offer convenience to their own bank customers and deterred other bank customers through levy of transaction charges but currently RBI mandates banks to offer 3-5 free transactions per month to its account holders on other bank ATMs.

Debit Card: The standard debit card issuance with every bank account not only popularised the card, it also changed the way an entire generation transacted. The wide acceptance of the card at point of sale points only helped the explosion of cards.

Sweep in accounts: This add-on feature on savings bank accounts lets accountholders benefit from the higher short-term interest rates that are better than what the savings banks offer and lesser than what an FD gives. The convenience introduced consumers to earning more than usual on their bank balance.

Money Transfer: With MICR, multi-city cheque books and NEFT/RTGS facility in 2015, the way one transfers money to others has witnessed a significant change. The process has increased the speed of transfer.

Mobile Banking: What started as limited banking services on the mobile phone, like SMS updates, has gone hi-tech with the advent of Smartphones, which allow you to replicate everything that you need to transact with a bank at the touch of your phone screen.

Digital wallets: This refers to an electronic device that allows you to make electronic commerce transactions through a smartphone by linking your bank account to the digital wallet.

Electronic Clearing System (ECS): This is a retail payment system which facilitates bulk payments from one-to-many and receipts that are from manyto-one. The advantage of ECS is experienced by those servicing loans and those investing in mutual fund SIPs, as these have eradicated the concept of post dated cheques.

Credit Cards: Have evolved from magnetic strips to chip based in recent times. Credit cards have reduced in the size over the years and have started coming with a chip to provide more security against cloning.

Cashback cards: Cashback cards return a per cent of the amount spent. The cashback benefit varies from card to card. Getting back part of the amount already spent always bring joy.

Credit Score: It is a numerical expression of a person’s overall credit history expressed in points between 300-900 where 300 is the bottom line and anything above 750 is considered good. A good score helps while borrowing money and the access to the same by individuals has become easy over the years.

Loan to Value limits: It is a term used to define the ratio of a loan to the value of the asset to be pledged. It varies from asset to asset; assets with fluctuating values like securities are likely to provide low loan to value ratio.

Home loan interest rate: Interest rate charged on a loan can be either fluctuating or fixed. It is better to opt for a fixed rate of interest on reducing balance method to save on the interest payments.

Pre-payment: Scrapped on home loans in 2014 , penalty/foreclosure charges for floating rate loans

Marginal Cost of Funds Lending Rate (MCLR): Since April 1 this year, RBI has mandated banks to use their MCLR as Benchmark Rate for new lending to customers. This is to enable the bank floating rates to become more responsive to the RBI Monetary Policy for ensuring policy rate cuts are passed on to borrowers. The old borrowers can also switch to MCLR.

Tax benefits on home loans: Limits u/s 24 and 80 C increased significantly from financial year 2014-15. Tax benefits of Rs 2 lakh can be claimed u/s 24 for interest on home loan which was earlier Rs 1.5 lakh only. Similarly, principal repaid can be claimed up to Rs 1.5 lakh unlike the earlier limit of Rs 1 lakh u/s 80 C.

Instant loans: Processing time of loans has reduced significantly over the years. Earlier sanctioning a personal loan used to take 20-30 days which is easily processed in 7-10 days now.

Near Field Communication (NFC): Contactless cards offer an easy way to pay by simply waving or tapping the debit or credit card instead of the usual swipe or dip. It doesn’t require a pin authentication for transactions up to Rs 2000, speeding up the payment process for daily spends.