Banking: Prashant Joshi

Many banks offer bank accounts for children or students. How are these different from any other savings account?
While a bank account for children is like any other savings account, accounts for children/students offer savings and investment options to parents along with teaching the child to manage her/his personal finances in a more responsible and independent manner. These accounts are designed keeping in mind the requirements of students and children. For example, many banks offer zero balance accounts, a free education insurance cover, a debit card with lower limits and a standing instruction facility to transfer a sum on a monthly basis for long term.

How does an overdraft on fixed deposits work?
This is an overdraft facility against security of fixed deposits (FDs) which is designed to offer liquidity to you without compromising on the returns. It is a convenient and immediate line of credit, where the interest is charged only on utilised amount and you don't have to prematurely break your FDs.

Banks allow an overdraft up to 90 per cent of the FD amount and the interest rate charged on the overdraft is in the range of two to three per cent over the rate of interest charged on the fixed deposit. You can also take an overdraft against deposits kept in the name of your family members, relatives or even friends, albeit at a higher rate.

I am 67 and facing a fund crunch. I own a house in the Mulund area of Mumbai. Which is a better option to get funds, taking a loan against property or a reverse mortgage?
Banks usually provide a loan-against-property facility to a borrower against a regular stream of income for age up to 65 years at the time of end of loan tenure. The borrower is expected to pay equated monthly instalments (EMI) on a monthly basis to repay the loan.

On the other hand, a reverse mortgage loan is provided to the borrower above the age of 60 years who wishes to leverage on the property owned by her/him. The institution providing a reverse mortgage will mortgage the property and offer a payout to the borrower periodically. The borrower is not expected to pay any EMI.

The loan amount, as well as the accumulated interest, is repaid on the borrower's demise through sale of property. The borrower can also repay the loan during her/his lifetime, as and when she/he receives additional cash flow.

Considering your circumstances, a reverse mortgage seems a plausible option. Most nationalised banks offer the reverse mortgage facility.

The views expressed are expert's own. Send your queries to yourmoney@bsmail.in
Today, Prashant Joshi, managing director and head, private and business clients (India), Deutsche Bank, answers your questions