Important Facts To Know About Home Loans

Home loans are granted for individuals and it is the individuals’ duty to make the best and wise use of them. If loans are taken for proper purposes and from trustworthy institutions then they prove to be a boon

Loan in simple terms can be referred to a sum of money that is borrowed at a given rate of interest and that has to be repaid after the stipulated time. Loans can be taken for personal purposes or for buying several amenities. The loan that is taken for buying a house is called a home loan.

Home refers to shelter, and shelter is the basic necessity of any human being. No man can carry on his life without a home. Every individual wishes to have a good, luxurious and the best home for himself. In a place like India, to get a house is a great achievement. The rates for properties especially in residential areas are on a rise. Also with the growing competition every individual wishes to buy the best dwelling for himself.

The rates of houses in India have increased to such an extent that it is near impossible for most of the individuals to gather the entire amount to buy a house without any help of outer sources. Here home loans play a significant role. A home loan can be taken from any bank or any financial organization.

At the initial stage, the individual has to pay a sum of money as the down payment which is about 20% of the total sum of money which he desires to borrow. In some cases the person has to give a security against the loan that is given to him. But before granting a loan the bank carries out various policies which help in deciding the eligibility for the loan to be granted. The income of the borrower, the value of the security and the age of the borrower are the main factors which are considered. 

After all these procedures, the amount of Home Loan that is to be given is decided by the financial body granting the loan. The borrower has to pay off the liability within the stipulated time that is given to him. The borrower is supposed to pay the principal amount as well as a given amount of interest.  The rate of interest may be fixed or floating. Fixed rate of interest means that the interest will remain fixed throughout the term of the loan. But from some years this type of interest has a clause according to which the bank can change the rate of interest if required.

In case of floating interest, the rate of interest is not constant. The bank can change the interest according to its will and wish and the borrower has to pay the told amount.

The EMI of the borrower depends upon the interest that is charged by the bank. The interest charged by every financial institution may vary. 

Banks that grant Home Loans have their own policies. It is very important for an individual to have up to date knowledge about the various policies of the banks or any other institutions. A person has to check out all the opportunities and then decide the best package for him. The bank that offers a reasonable amount of interest and offers a lot of time for repayment of the loan is the best option. The borrower should be clever enough to take a wise decision.

Home loans are granted for individuals and it is the individuals’ duty to make the best and wise use of them. If loans are taken for proper purposes and from trustworthy institutions then they prove to be a boon for the borrower in fulfilling his dreams of having the bet dwelling for himself and his family.

Types Of Home Loans

Home loans can be home equity loans or mortgage loans. Home Loans are of various types. You should have enough knowledge on the various Home Loan options available, before applying for one.

Home loan refers to a mutual agreement between the borrower and the lender in which the borrower purchases a property and the lender keeps the same property as the security for the amount borrowed by the borrower. There are different types of home loans available in the market and you should have the enough knowledge about different kinds of home loans before applying for one. 

These are the different types of home loans that are presently available in the market: 

Home Purchase Loans 

These are the basic type of home loans used for purchasing of a new house.

Home Improvement Loans 

These loans are given for implementing repair works and renovations in a house that has already been purchased by the customer. 

Home Construction Loans 

These loans are available for the construction of a new house. 

Home Extension Loans 

These loans are given for the expansion of an existing house of a customer. For example: addition of another room in the house, etc. 

Home Conversion Loans 

These loans are available for those who have already financed their existing house with a home loan and wish to buy and move to another house for which some extra funds are required. 

With home conversion loan, the existing loan of the customer transfers to the new house that includes the extra amount that the customer requires. This eliminates the need of pre-payment of the previous home loan that the customer borrows. 

Land Purchase Loans: These loans are available for purchasing land for construction. This type of loan is also available for the investment purpose.

Bridge Loans: You can take bridge loans, if you wish to sell the existing house and purchase another one. The bridge loans help in financing the new house, until a buyer is found for the new house. 

Eligibility For Taking Home-Loan 

The person who is of 21 years or above is eligible to apply for a home loan but he must have a regular income. 

There are certain documents that a salaried person has to submit to the bank to get home loan. Documents that a bank needs to sanction your home-loan include:

An Application form with a photograph 

Identification proof and Residence proof 

Current salary slip 

Form16 or Last Income Tax Returns document 

Last 6 months or annual bank statement 

Processing fee cheque 

Maximum Loan And Maximum Term Of The Home Loan 

Maximum loan is 85 % of the cost of the house and it is also based on the repayment capacity of the customer. 

Maximum term for home loan is up to 20 years, and is also calculated keeping in view the retirement age of the customer.

Easy Home Loans

It’s not a difficult task to get home loan nowadays, but the most important thing to keep in mind before applying for one, is to compare all the variables.

Now a days’ getting home loans is quite an easy task. Home loans can be home equity loans or mortgage loans. These loans are in no way complicated but rational, effortlessly obtainable and are specially made for home owners. The finest element about these loans is that they are available from all types of Banks and NBFCs.

With the property prices going up, one needs a lot of funds for purchasing a house. In such a case it’s not possible for every individual to have the entire amount available in cash. Only some people have an agreeable sum in their banks or in form of current assets to pay off the total cost of the house. The others who are incapable of managing the funds thus apply for loans from financial bodies. Loans that are granted to such buyers are termed as mortgage loans. In general, these types of loans are termed as mortgage because such loans are given only when the home owner gives a lien or a security against the loan that is granted to him.

In the Indian scenario, joint families are breaking into nuclear families and therefore having a independent home has become a very basic need. For accomplishing this basic need, banks as institutions, play a vital role. They offer reasonable and rational deals on Home Loans that prove to be of a great use to the buyers. But still it is very significant for the purchaser to have fully knowledge about the products that are offered by the bank so that he can wisely compare and take the right decision. In case the customer is incapable of comparing and making the right choice then it could result in the buyer paying more that the required amount to the bank.

The document that permits the borrower to hold the title over the property and also allows the usage of the property as a guarantee for the loan is known as mortgage. If the borrower is not able to pay off the liability then the bank can take a lien over the given property. On payment of the loan, the bank cancels the lien and gives back the security.

It is extremely important for the borrower to have full knowledge about the different types of home loan options available, since the amount charged by the lenders varies across these options.

Various Types of Loan

Loan is the amount of money that a borrower lends from the lender with some value of interest rate on that amount. There are various types of loans that are available in the market and you can take any type of loan that suits your requirements.

Various Types of Loan: Long Term and Short Term Loans, Secured and Unsecured Loans

The meaning of Unsecured Loans

Unsecured loan is something that is not supported by collateral security. These types of loans generally depend upon the borrower’s credit rating. This is the reason why such types of loans are difficult to apply for than the regular secured loans. Income of the borrower plays a vital role here. When loan is granted, it is not completely based on the credit achievement of the borrower. It is verified and completely dependent upon the overall goodwill of the borrower in the financial market, like the payment of debts.

Assessment criteria for unsecured loan

We know that unsecured loans are not safeguarded against any asset or property, in case if the borrower fails to comply with the payments on time it becomes very difficult for the lender to get back his money on time. Unsecured loans have high possibility of risk than the secured loan. Particularly, lenders take a note of the borrower’s credit history and records and when and how they have cleared and completed the payments on time.

Purpose of Rate of Interest

The rate of interest that is applied to unsecured loans basically depends upon the risk level and total amount of loan. With the increase in loan amount you will find a decrease in rate of interest and higher the risk more high would be the rate.

Meaning of Secured Loans

Loan that is supported by a security is known as a secured loan. If in any case the borrower fails to comply with the loan amount, the lenders may take possession of the asset or property collateral to the loan. Here, there is less chance of risk. The creditor has completely authority over the properly and can at any time sell the property or asset. Secured loan is a reprieve for creditors and mostly there is a financial jeopardy involved in it because it gives authority to the creditors to take the valuable assets when debt is not repaid.

Criteria for Secured Loans

As we all know secured loans are loan granted against collateral security, it becomes easy for the lender to get his money or payment on time. He can cover the payments without any loss. So in case the borrower defaults payment, there is less risk to bear for the lender. Risk level is low in comparison with unsecured loans.

Rate of interest determination

Secured loans are cheaper than unsecured loans. The companies verify the credit score of the borrowers and if the needs and requirement of granting such loans are satisfied then the companies can proceed with the loan. High value collateral and good credit score helps you get a very low interest rate. 

 

Long Term Loans

The loans that are taken for a period of at least three years are termed as long term loans under the definition that is given by the financial bodies. Nevertheless, these types of loans can be for maybe ten or twenty years as well. For any long term loan a guarantee is required. A security is to be given for getting the loan. The security can be a land, a property, any sort of asset etc. the rate of interest plays a vital role in the loan process. The amount of loan, the period that is decided for the repayments of loan, the income of the individual are taken into consideration for calculating the rate of interest.

Short Term Loans:

As understood by the name, these types of loans are for a short period of time. They do not have any compulsions as compared to long term loans. Short term loans are taken for payment of regular expenses. The amount that is granted as a loan is also a smaller sum is compared with the long term ones.

India’s Advertising Regulator Upholds Allegations Against AMFI For Misleading Investors.

India's advertising regulator has upheld an allegation that promotional booklets published by Association of Mutual Funds in India were misleading investors about returns from mutual fund investments. An investor had complained against the advertisements to the Advertising Standards Council of India's consumer complaints council, claiming that the promotional campaigns wrongly assured 'better' returns on mutual fund investments.

Endorsing the compliant, the advertising regulator has asked Amfi to correct the publicity material within 15 days of the order dated December 12.

"The claim in the booklet that the fund manager will ensure 'better returns', was misleading and contravened Chapter 1.4 of ASCI Code," the advertising regulator said in its order to Amfi.

The advertising regulator was probing into allegations that the advertisements contained some misleading statements and a television promotional campaign by Amfi was masking the risky nature of mutual fund investments by equating them with savings. However, the complaint against the television ad was dismissed. Confirming the matter, Amfi's CEO HN Sinor said: "The TV commercial complaint was dismissed. As for the brochure, they have asked us to make a little correction, which we've made. The matter is settled and over."

The advertising booklet, which is also available online, features a variety of general information on mutual funds and without naming any particular scheme explains advantages of mutual fund investments over savings account or provident funds. However, according to ASCI, some of the comparisons are incorrect. Amfi had sent more than 41,000 booklets and about 1,850 soft copies were downloaded from its website, according to the regulator's September quarter update.

"There were several instances that give assurance of fixed return. Amfi has admitted the error. They have been asked to remove all such clauses," Alan Collaco, secretary general, ASCI, told ET. Amfi's ad campaign, the first of its kind by an industry body, comes at a time when poor market conditions are denting profits of fund houses.

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IRDA Proposal To Promote Open Architecture Will Help Customers

Gopal Sharma lives in Ranchi and banks with a popular bank. He is keen to invest in a long-term child plan for his kid's education and, therefore, turns to his bank to seek advice on products that suit his requirement as the bank, in its capacity as a corporate agent, also offers insurance plans.

However, the bank's branch is not able to help him or provide quality advice as it is too small in the larger scheme of things and insurance is not a focus area for it. Hence, he cannot access the right product as the bank has neither the information nor trained staff to guide him.

The wide prevalence of such cases has driven the Irda (Insurance Regulatory and Development Authority) to lay down guidelines for an open architecture, a concept which address the problems of customers in search of appropriate insurance options and, thereby, brings about their financial inclusion.

So what is an open architecture and how will it help customers? Let us first look at the various distribution channels of insurance products we have today. Currently, an insurance policy can be bought in three ways: through an agent; from a bank where one holds an account; or directly from the insurance company.

Buying insurance from a bank, called Bancassurance, has gained popularity since the opening of the insurance sector. Under the current structure, banks can only offer products of a single life insurer with which they have entered into a corporate agency tie-up.

The structure leaves banks and customers with little choice but to bundle available products with current services, which, in some cases, may not be in the best interest of the customer. The structure prevents banks from offering unique and powerful packages that are flexible and versatile to meet a range of needs. This has hampered the ability of banks to effectively differentiate themselves through their financial advice and solutions that are useful to customers.

With their sound infrastructure, experienced and trained staffs, and intricate network, banks are ideally placed to reach out to a vast clientele across the country with a wide range of offerings. And, yet, bigger banks have been unable to capitalise on the insurance opportunity in all their branches, especially in smaller towns and cities.

The open architecture aims at increasing insurance penetration through optimal utilisation of banks' infrastructure and experienced workforce. However, for it to be successful, the regulator should allow the banks to tie up with at least two non-life and two life insurers in each state. This will promote healthy competition and allow the banks to offer a choice to their customers.

The open architecture could enable an insurance company to offer its products at any branch of any bank across the country through multiple tie-ups. This will enlarge the range of options available to potential insurance buyers by increasing insurance penetration into geographies left untapped so far.

Fall In Rate to Benefit Floating Rate Customers

Floating rate home loans, which did not reflect market rates when they fell, would now become more faithful to their name. With all major lenders discontinuing prepayment charges on floating rate loans, including those refinance , banks say that floating rates will now indeed float.

ICICI Bank waived pre-payment charges on floating rate home loans effective from November 23 this year for both new and existing customers. This is applicable for partial or full prepayment of home loan. The private bank was the last of big lenders in home finance to continue to impose a penalty on borrowers who chose to close their loan account even if it was from their own resources. Now any floating rate loan can be repaid without penalty.

According to a report by rating agency ICRA, there is already a high level of pre-payment in home loans. The rating agency has completed an analysis of home loan portfolios that have been securitized and subsequently rated by ICRA. The median monthly pre-payment rate has been around 1.1%. Banking sources say that in a falling interest rate regime, the absence of pre-payment charges will put pressure on banks to keep revising their rates in line with those prevailing in the market . If there is a surge in pre-payments , it will affect banks that have securitized and sold their home loan portfolios.

Other dominant lenders such as State Bank of India, HDFC and LIC Housing Finance had discontinued pre-payment charges earlier this year. While SBI had done away with all prepayment charges, including those for refinanced loans voluntarily , HDFC and LICHF discontinued with pre-payment penalties following a National Housing Bank directive in October . Other public sector banks and Axis Bank in the private sector did not have a pre-payment penalty on floating rate loans. Other banks have done away with charges following moral suasion from RBI.

Banks To Ease Regulations For Customers

In a move that will cheer millions of small borrowers, banks have agreed to abolish penalties for prepayment of home loans taken on floating rates of interest. They will also stop penalizing savers who fail to maintain a minimum balance in their bank savings accounts.

The decisions were taken at a meeting between the Reserve Bank of India (RBI) and the bankers’ lobby Indian Banks’ Association (IBA) on Friday, hours after the central bank signalled an end to the cycle of rising interest rates that started in March 2010, according to bankers who participated in the meeting and spoke on condition of anonymity. Banks charge 2-4% of the loan amount outstanding as a prepayment charge from home loan customers. At least 95% of home loans carry a floating rate of interest, according to RBI, which effected 13 rate hikes before applying the brakes on Friday by leaving policy rates unchanged amid concerns over slowing economic growth.

In step with RBI rate increases, banks have been raising home loan interest rates, which raised the equated monthly instalments of borrowers.

Harsh Roongta, chief executive of apnapaisa, an online provider of information relating to price and features of loans, insurance and investments, said the agreement by banks removes an impediment for borrowers wanting to change their mortgage lender.

“Banks overcharge their existing customers and the prepayment penalty prevents them from moving to cheaper competitors,” he said. “This will facilitate movement of customers and remove a major financial hurdle. Lenders will now either have to drop interest rates for existing customers or risk losing them.”

The decision to abolish the prepayment penalties followed two meetings on Friday attended by RBI deputy governor K.C. Chakrabarty, IBA chairman M.D. Mallya and top bankers including ICICI Bank?Ltd managing director and chief executive officer Chanda Kochhar?and HDFC Bank Ltd?managing director Aditya Puri.

The top three home-loan providers—Housing Development and Finance Corp. Ltd (HDFC), ICICI Bank and State Bank of India?(SBI)—have already announced discontinuation of penalties for prepayment.

HDFC waived the prepayment penalty on floating rate loans after a notification by the mortgage lending regulator, the National Housing Bank.

ICICI Bank and SBI announced their decisions last month. SBI has abolished penalties on both fixed as well as floating rate home loans. ICICI continues to charge 2% of the loan amount outstanding as a penalty if borrowers prepay a fixed rate loan.

Abolishing prepayment penalties was one of the 10 action points adopted by banks at the annual conference of banking ombudsmen in Mumbai in early September to improve customer service. But banks backtracked from the agreement weeks later, arguing that the move could lead to supply-demand mismatches in liquidity.

The abolishment of prepayment penalties was first proposed by a committee headed by former Securities and Exchange Board of India (Sebi) chairman M. Damodaran in June 2010; the committee looked into banking services rendered to retail and small customers, including pensioners.

Other recommendations of the committee included creation of a toll-free common bank call number for redressal of customer complaints and offering of no-frills savings account without a stipulated minimum balance amount.

The minimum balance that has to be maintained in bank accounts ranges between Rs. 1,000 and Rs. 25,000. Banks also offer no-frill accounts that do not require a minimum balance.

Damodaran said the committee he headed wanted to ensure that bank customers are free to switch to other banks.

“In any industry the customer has a right to choose a service provider without getting locked in,” he said in an interview. “Customers should have a choice. The committee held wide-ranging consultations with bankers and other people, and as a chairman, I am happy that some of these have been accepted.”

IBA chairman Mallya confirmed that banks met RBI to discuss the Damodaran committee recommendations on Friday.

“Prepayment penalty is not there in 11 of the banks and it is left to the rest what view they will take on this,” said Mallya, who is also chairman and managing director at Bank of Baroda?. “Our bank has waived the penalty.”

K. Ramakrishnan, chief executive officer of IBA, said the banking lobby group will follow up with banks and monitor the implementation of these recommendations.

“The rest of the recommendations will be implemented in a phased manner after coming to a consensus after discussing the issue with banks and RBI,” Ramakrishnan said.

NABARD Fixes Rs 77,803.49 Cr As Credit For 2012-2013

The National Bank for Agriculture and Rural Development (Nabard) has pegged Rs 77,803.49 crore as the potential bank credit for 2012-13 in Tamil Nadu. This will be an 18 per cent growth over the ground level credit target of Rs 66,161 crore in 2011-12.

The credit potential comprises crop loan at Rs 31,574.14 crore, agricultural term loan of Rs 17,010.05 crore, non-farm sector at Rs 14,032.35 crore and other priority sector at Rs 15,186.94 crore, said Lalitha Venkatesan, chief general manager, Nabard.

Of the total credit, short-term will be 40.6 per cent, she added.

“The real challenge for agriculture is to enhance capital from both public and private sectors in research, infrastructure, including market, cold storage, warehouse and others.” The other major challenge is labour shortage, for which mechanisation is the solution, she said.

Reserve Bank of India regional director NS Vishwanathan added, banks' performance in the state was much better compared with other parts of the country. For instance, the CD ratio of the banks in Tamil Nadu was 117 per cent compared with the national average 72-73 per cent.

“However, we (Banks) need to scale up and improve supply-side infrastructure,” he said

On financial inclusion in Tamil Nadu, he said the target was to cover 4,500 villages, with a population of 2,000, by March 2012. "In the State Level Bankers' meet, we had decided to achieve it before December 2011. As of September, 75 per cent of the banks have achieved it,” said Vishwanathan on the sidelines of the State Credit Seminar, organised by Nabard.

Sharad Sharma, chief general manager, State Bank of India, said SBI had been allocated 900 villages, as part of financial inclusion programme in the state, and the target was to be achieved by March 2012. “But we have achieved in November 2011 itself -- half of the villages are covered by bank's branches and rest through the business correspondence model,” said Sharma.

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ICICI To Lessen Stake Holding In First Source Solutions To 10%

India's biggest private lender ICICI Bank may have to cut its holding in Firstsource Solutions - the global business process outsourcing firm, which it originally promoted a decade ago - to comply with new norms announced by the Reserve Bank of India. The central bank seeks to restrict equity investments by banks in non-financial services.

ICICI Bank, which still controls 18.1% of the company's equity, may have to pare its holding to 10% in line with the guidelines issued by the banking regulator late on Monday.

The new rules say that banks can hold only up to 10% of the capital of the investee company or 10% of its paid-up capital and reserves, which is less.

The bank, while confirming it will have to dilute its stake in the BPO, said the RBI norms do provide a room for holding investments in excess of the limit with regulatory approval. An ICICI Bank spokesperson said there is a three-month window during which the bank can approach the RBI with a proposal on its existing investments. "We will deal with it appropriately in due course," the spokesperson said.

The RBI has capped the equity investment of a bank and its subsidiaries in non-financial services at 20% of the investee company's paid-up share capital. According to the banking regulator, the new norms were aimed at checking indirect influence or misuse and to ensure that banks focus on their core banking activities. The new rules may not impact other banks, the state-owned lenders, who hardly have any investments in non-financial services.

"The RBI guideline covers investments in non-financial companies, which by definition exclude investments in insurance and other subsidiaries of the bank, which are financial companies. Further, the bank's insurance subsidiaries are not expected to require significant capital infusion going forward based on the current regulations and guidelines. The guidelines would not have any material impact on ICICI Bank," the bank's spokesperson said.

The new norms also cap the investment of a bank, entities which are the bank's subsidiaries, associates or JVs or entities directly or indirectly controlled by the bank and mutual funds managed by Asset Management Companies controlled by banks at 20% of the investee company's paid up share capital.

"The Reserve Bank of India norms are aimed at ensuring that banks do not go bust on account of exposure to a single group," said a senior banker. According to this banker, who declined to be identified, the new rules were based on a recommendation of the Board for Financial Supervision (BFS) to check the loophole wherein prior approval of the RBI was not required when it came to investment in non financial services. On the Bombay Stock Exchange, the ICICI Bank scrip ended the day down 0.33% at 705.30.

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Reserve Bank Of India Must Stay Away From A Cut In Cash Reserve Ratio

The Reserve Bank of India (RBI) faces the classical central bank dilemma, with both growth and inflation in uncomfortable territories. While no rate action is expected in the upcoming December announcement, the monetary policy stance and the near-term guidance, if any, would be of sheer interest.

Inflation has peaked — it would probably soften to less than 7.5 per cent by March, broadly in line with RBI’s projections. But it can stay fairly sticky thereafter — in an uncomfortably elevated range of 6.5-7.5 per cent for the major portion of 2012. The sharp deterioration in the growth trajectory would now increase the pressure on RBI to ease its policy stance. The central bank would possibly start facing the ‘behind the curve’ chatter again, this time on the easing front. Questions would now arise whether RBI over-tightened in the last few months. But an average headline inflation rate of around seven per cent is a clear deterrent against any rapid reversal in monetary policy stance — RBI would possibly hold the policy interest rate steady for the remaining months of 2011-12. Cuts in the repo rate could start from the April-June quarter.

Of late, there has been widespread speculation of a cut in the cash reserve ratio (CRR). I feel that would be a sub-optimal policy move at the moment. It could be perceived as prematurely diluting RBI’s inflation-fighting stance and stoke inflationary expectations, which have started coming down.

Rather, the continued use of open market operations (OMOs) to alleviate tightness in liquidity is a superior course of action. OMOs can be conducted at a measured pace, at the discretion of the central bank. OMOs would also help tame elevated bond yields — a CRR cut would not be able to achieve that in a sustained fashion. This is a particularly important consideration now, owing to strong possibilities of further overshooting of government borrowings in 2011-12.

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Bharti AXA Unit Linked Life Future Invest Policy Launched

This is a limited payments unit-linked life insurance policy. The term of the policy is fixed at 10 years and the premium paying term is five years.

Life insurance benefit: There are two options under the plan - higher of the fund value or sum assured and sum assured + fund value. The sum assured is 10 times the annual premium if the age of the policy holder at the time of entering the policy is between 18 years and 44 years, and seven times if the policyholder is aged between 45 years and 70 years at the time of buying the policy.

The policy has inbuilt double accident benefit. In case the life assured dies in an accident, an additional sum equal to the basic sum assured will be paid to the beneficiary under the policy.

Eligibility: The minimum entry age is 18 years and the maximum entry age is 70 years. The maximum maturity age is 80 years. The minimum premium under the plan is Rs 18,000 per annum.

Fund options: You can choose from six funds. You can invest in a single fund based on your risk appetite or make allocation to multiple funds available under the plan. You can also switch between the funds and redirect your future premiums. The plan offers partial withdrawal facility after the completion of five policy years.

Charges: There is no premium allocation charge, but the policy administration charge is 0.50% of the annual premium deducted monthly subject to a maximum of Rs 6,000 per year. Fund management charges are in the range of 1% to 1.35% depending on the option of funds available under the plan. The accident death benefit comes at an additional cost of Rs 1 per Rs 1,000 sum assured.

Limitations: The maximum term under the policy is only 10 years, which may not be adequate if you are young. The policy administration charge is 0.50% of the annual premium deducted monthly, which turns out to 6% per annum. This will affect the net yield from the policy.

Printing of Rs 500 Notes Goes Up 17 Times In The Last Decade

There has been a fundamental change in what is sitting in an Indian's wallet: it's got more peach-pink and moss-green than ever before. The appetite for the big bills - Rs 1,000 and Rs 500 - is growing furiously.

The figures tell the story. The number of Rs 500 notes minted across the country has grown almost 17 fold in the last decade, from 213 million pieces in 2000-2001 to 3,543 million pieces in 2009-10. The number of Rs 1,000 notes minted annually has grown nearly nine times, from 115 million in 2000-01 to 1,008 million in 2009-10.

Today, there are fewer notes of Rs 20 and Rs 50, whether individually or collectively, than the total number of Rs 500 notes out there. These notes have quietly disappeared from automated teller machines with the value of every cash withdrawal rising. "Growth in the value of banknotes outpaced that of volume, reflecting the continuing compositional shift towards higher denomination banknotes, particularly 1,000 and 500," the RBI said in its annual report.

RTI activist Manoranjan Roy, who sought information on the number of notes printed by the RBI, found that the big denomination notes are in huge demand.

Economist Ajit Ranade tried to explain the demand pointing at the near double-digit inflation for the last two years. "The same lifestyle today requires 10-20% more money." he said.

K Gayathri from the Institute of Social and Economic Change, Bangalore, added that the growing economy had put more money in people's hands, especially those from the manufacturing and service sectors. Consequently, spending too had gone up.

Companies that run ATMs too say they are stocking more money in the machine trays as the "average ticket size" (simply put, the one time withdrawal) has ballooned from Rs 5,000 to Rs 7,000 approximately in the last three years. "Cost of living has gone up, the rise in our aspirations and desires push up demand for cash," said Mani Mamallan, chief marketing officer of C-H Technologies that manages ATMs for the State Bank of India.

Currency in circulation is the largest component of reserve money and is primarily determined by demand. "There was acceleration in currency in circulation in 2010-11 due to increased demand due to economic growth, high inflation and low yield on deposits," said RBI officials.

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FM To meet CMs and Top Bankers On Credit Offtake In East

Finance Minister Pranab Mukherjee is expected to review credit offtake and farm sector lending in a meeting with Chief Ministers of Eastern region and heads of PSU banks headquartered in the region in Kolkata tomorrow.

The meeting will discuss the progress of centrally-sponsored schemes, state-wise flow of credit to the agriculture sector, credit-deposit ratio and loan to weaker section of society among others, official sources said.

Implementation of the Aam Admi Bima Yojana and co-contributory pension scheme Swavalambam, important priorities of the UPA-II government, would also be reviewed in the meeting among others, they added.

Financial inclusion, payment under the Mahatma Gandhi National Rural Employment Guarantee Act and revival of short-term cooperative credit are also key discussion points of the meeting.

It has been decided to provide appropriate banking facilities to habitations having population in excess of 2,000 by March 2012, Mukherjee had said in this year's Budget speech.

"The banks have identified about 73,000 such habitations for providing banking facilities using appropriate technologies," he had said.

The meeting comes against the backdrop of slowdown in GDP growth and inflation close to double-digit mark.

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India under threat of earthquakes as revealed in a report of World Bank and United Nation

India's burgeoning cities and interventionist policies have aggravated the threat from natural disasters, the World Bank and United Nations said on Thursday.

They emphasised the importance of preventive measures to minimize loss of life and property from natural hazards and the need to raise awareness so that governments are pressed to take the issue seriously.

"Many cities are outgrowing the capacity of roads, water supply, and sewage disposal systems to serve their inhabitants even in the vaunted homes of high-tech industries like Bangalore, India. These are the cities where dangers may be unnecessarily high," said the report 'Natural Hazards and UnNatural Disasters-the Economics of Effective Prevention', co-published by the two organisations.

According to the report, around 200 million city dwellers in India will be exposed to storms and earthquakes by 2050.

The authors also faulted price control policies in India as they distort incentives and restrict the access to hazard-related information.

Citing the example of rent control practices in Mumbai, they said: "Property owners often neglected maintenance, causing buildings to collapse during rains. Policies that provide secure ownership of property would also serve as incentive for owners to invest in safer construction and better maintenance."

Emphasizing on preventive measures, the report also suggested steps such as greater access to hazard-related information, regulatory changes to remove distortions like rent controls and construction of hazard-specific infrastructure.

"Sometimes increased spending is warranted and even the most modest increases and greater sharing of data internationally can have enormous benefits," says the report.

A study by the authors also reveals the relation between democracies and prevention spending by governments. The upshot of the study is that a dollar spent on prevention is more than ten times more valuable than a dollar spent on relief in democratic societies.

For the politicians to take the issue of disaster management seriously, it is important for the general public to endorse the matter emphatically, the WB managing director Mahmoud Mohieldin told ET.

The report also suggests that there is a strong relation between measures that sustain development and those that increase disaster prevention.

"For example, investments in health or education seemingly have little to do with disaster prevention, but healthy and literate societies are also more resilient to disasters. Vice versa, disaster prevention sustains the pay-offs from other interventions. Preventing disasters is as much about development as development is about preventing disasters," said Apurva Sanghi, the report's Task Team Leader.

The report lauds India's efforts at disaster management thus far but believes more measures will be required as climate change will change the 'disaster prevention landscape.

"Disaster prevention is increasingly becoming a priority in India", said Roberto Zagha, WB Country Director, India.

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