Banking: Prashant Joshi

My son would go abroad in two years to study. I would like to know if I can hedge my foreign exchange risks. If yes, how? And what is the time period I should have in hand to make the most of it?
The Reserve Bank of India (RBI) allows resident individuals to hedge their foreign exchange risk arising out of actual or anticipated remittances, both inward and outward. You can book forward contracts for the amount of the fees to be paid up to a limit of $100,000, based on self-declaration. However, the tenor of this contract can be up to one year only. You can book this contract through your banker on the basis of an application-cum-declaration in the format given to them. You can also hedge against dollar appreciation by buying currency futures contract. These can be bought from a recognised stock exchange through their trading members. However, here as well, the maximum tenor is one year. The foreign exchange market is volatile and constantly changing. Forwards and futures are riskier than purchasing physical foreign currency and extreme caution should be exercised.

I am planning to take a housing loan. Banks offer both base rate-linked and benchmark prime lending rate-linked loans (BPLR). Which rate should I choose? And why? What are their merits and demerits?
All banks currently offer only base rate-linked loans to new customers. According to RBI guidelines, loans linked to other benchmarks like BPLR ceased to be offered to new customers from July 1, 2010.

When can one apply for a top-up on home loan? And, how can it be used?
To avail of a top-up loan, you must have a good repayment track record on home loan. Most lenders have a minimum criterion that you should have serviced your home loan for a period of 6-12 months before you can apply for a top-up loan. A top-up loan can be used for any legally approved purpose like home renovation, education expenses and so on. They cannot be used for speculative activities.

I have an education loan for which I am repaying in a balloon mode. It will continue for another two years. Meanwhile, I have secured admission in a foreign university and I will have to take another education loan to fund that course. Will I get another education loan? I will either not be earning during the new course or will be earning just enough to pay for my living expenses.
Certain banks and financial institutions might allow you a further moratorium on repayment of your existing education loan if you're availing a new education loan. However, this would depend on the credit worthiness of the applicant, the course being considered and amount of loan, among others.

The writer is MD & head, private & business clients (India), Deutsche Bank.