Banking: Prashant Joshi

Readers' Corner

Should individuals be looking at forex derivatives? Are they useful?
Forex derivatives protect individuals from fluctuations in the market because the exchange rate can be locked up to one year in advance, thereby knowing exactly what the currency will cost.

Forex derivatives help protect individuals from the risks of a moving market, and hedge any foreign exchange exposures arising out of actual or anticipated remittances, both inward and outward.

According to existing guidelines, individuals can book forward contracts, without production of underlying documents, up to a limit of $100,000, based on self declaration.

Forex derivative products are also a new asset class for diversification of investments for all resident Indians. An individual can book a currency future traded on recognised exchanges in India.

The advantage is that the margin requirements are very low (usually 10 to 20 per cent of the contracted amount) and the contract size is small, thereby making these affordable. The client can maintain the required margins in the form of cash or term deposit as collateral for trading or taking exposure in the currency futures markets. Additionally, all trades done on recognised exchanges are guaranteed by the clearing corporations eliminating the risk associated with the counter party default.

I already have an ongoing education loan, which I am repaying in a balloon fashion. There are another two years to go for the loan. Meanwhile, I have secured an admission in a foreign university and I will have to take another education loan to fund the course. At the same time, I don’t want to forgo that. Will I get another education loan? I will either not be earning during the new course or will be earning just enough to pay my living expenses. Please advise on the same.
Certain banks and financial institutions may allow you a further moratorium on repayment of your existing education loan if you are availing of a new education loan. However, this would depend on the credit worthiness of the applicant (in this case you), the course being considered, amount of loan and so on.

I own four credit cards. Obviously, I end up using it in times of need. I have started feeling that I don’t really need all of the cards. Hence, I wish to keep only one card. How do I cancel the others? Will there be a penalty on it?
The card cancellation procedure is defined by each bank and you must follow the bank’s instructions. Most issuers accept instructions through their centralised phone banking units and/or a written request. Please ensure there is no outstanding balance and all dues are paid off. Do bear in mind that the annual or card joining fee is not reimbursed. All add-on cards will also be cancelled along with the primary card. Ensure you receive an acknowledgment from your card issuer.

Today, banking expert Prashant Joshi, MD & India head of private & business clients, Deutsche Bank, answers your questions Views expressed are the expert’s own. Send your queries at yourmoney@bsmail.in