Readers' Corner: Mutual Funds

I had a salary account with a bank. After changing jobs, I have not been using it. But, every month I get a message saying that I am being charged a penalty of Rs 700 for not maintaining the balance. It shows a negative balance of about Rs 7,000. What is Reserve Bank of India's (RBI's) rules on penalties. Also, will the bank ask me to pay up the entire outstanding if I decide to close the account? What happens if I ignore the messages ?

According to the RBI guidelines, a savings account needs to be treated as inoperative or dormant if there are no transactions in the account for over a period of two years. For the purpose of classifying an account as "inoperative" both the type of transactions, that is, debit as well as credit transactions induced at the instance of customers as well as third party is considered. However, the service charges levied by the bank or interest credited by the bank is not considered.

If the account is an operative account then bank is well within in its rights to apply service charges on the account. However since there are no specific guidelines on charging the customers at the time of closure of account, it is presently at the discretion of the incumbent bank on what action it chooses (that is, recover the penal charges or waive them).

My bank is forcing me to take a home insurance with a home loan, which is very expensive.

I am told I won't get a loan if I don't take the insurance. Is such bundling of products permitted by RBI? Is it compulsory to have an insurance cover to take a loan when my property is mortgaged with the bank? Can't I take one independently where the premiums are lower?

Since the bank is taking an exposure for a long tenure, to ensure that the collateral being funded is safeguarded against unforeseen circumstances (fire, earthquake, etc.), banks ask the customer to get the property insured. Customers have the option to get it insured from an insurance company of his choice (with the policy assigned to the bank). The customer is free to exercise this choice.

Can a bank have different interest rate on credit card for different customers?

Banks offer cards with a variety of value proposition and features. Typically, different types of card will have differentiated features and the interest rate on the card is one such feature. Hence, it's possible that a bank can offer different type of cards with varying interest rates. It might also offer differentiated rates for different segments of customers.

I want to transfer $100 in the US from my savings account to a person who did some freelance work for me. Can you please tell me the procedure, forms I would need to fill and the details that I would need from the freelancer?

There could be two possible scenarios here. One, a resident Indian bank account holder sending $100 to a freelancer in USA. The remitter will need to provide a signed "Application cum A2 Form for purchase of Foreign Exchange" along with the invoice copy for the payment to his/her Bank in India. Based on these documents, the Bank will debit the customer's account at the prevailing exchange rate and send the remittance abroad to the beneficiary's (freelancer) account.

Two, a non-resident Indian (NRI) in the US sending $100 to freelancer (resident Indian) in India. The customer can initiate a wire transfer from his/her local Bank in the US to the freelancer's bank account in India. Once the foreign currency funds are received by the Bank in India, the beneficiary account holder will need to provide a signed "Disposal Instruction" form which essentially contains the details of the purpose of the remittance and the sender details to receive the funds into his/her account. Some banks might also require the underlying invoice copy for the payment, if the beneficiary account in India is less than six months old. Based on the disposal instructions, the bank in India will convert the foreign currency into the rupees according to the prevailing exchange rate and credit the beneficiary (freelancer's) account.

The views expressed are the expert's own.
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