The funds will be settled through this rupee savings bank account in case of any purchase/sale. Periodic coupon payments and redemption amount of the invested security will also be credited to this bank account.

The scheme of reverse mortgage has been introduced recently for the benefit of senior citizens owning a house but having inadequate income to meet their needs. Some important features of reverse mortgage are:

• A homeowner who is above 60 years of age is eligible for reverse mortgage loan. It allows him to turn the equity in his home into one lump sum or periodic payments mutually agreed by the borrower and the banker.
  
  
• The property should be clear from encumbrances and should have clear title of the borrower.
  
  
• NO REPAYMENT is required as long as the borrower lives, Borrower should pay all taxes relating to the house and maintain the property as his primary residence.
  
  
• The amount of loan is based on several factors: borrower’s age, value of the property, current interest rates and the specific plan chosen. Generally speaking, the higher the age, higher the value of the home, the more money is available.
  
  
• The valuation of the residential property is done at periodic intervals and it shall be clearly specified to the borrowers upfront. The banks shall have the option to revise the periodic / lump sum amount at such frequency or intervals based on revaluation of property.
  
  
• Married couples will be eligible as joint borrowers for financial assistance. In such a case, the age criteria for the couple would be at the discretion of the lending institution, subject to at least one of them being above 60 years of age.
  
  
• The loan shall become due and payable only when the last surviving borrower dies or would like to sell the home, or permanently moves out.
  
  
• On death of the home owner, the legal heirs have the choice of keeping or selling the house. If they decide to sell the house, the proceeds of the sale would be used to repay the mortgage, with the remainder going to the heirs.
  
  
• As per the scheme formulated by National Housing Bank (NHB), the maximum period of the loan period is 15 years. The residual life of the property should be at least 20 years. Where the borrower lives longer than 15 years, periodic payments will not be made by lender. However, the borrower can continue to occupy.
  
  
• From FY 2008-09, the lump sum amount or periodic payments received on reverse mortgage loan will not attract income tax or capital gains tax.

Note- Reverse mortgage is a fixed interest discounted product in reverse. It does not take into account the changes in interest rates as yet.

Important – This part is fine printed to help you practice reading the fine print. The loan agreement documentation runs into nearly 50 pages and its language is complex. If you thought everyone signs the same agreements with the bank, where is the need to read? You are not taking an informed decision. If you thought somebody would have pointed this to me if there was any problem, then maybe they did but you could not read or listen to it. Think again! Borrowers' and lenders' rights may not be expressed clearly in a transparent manner in all the loan agreements. The home loan agreement may not be provided to you in advance so that this could be read and understood before you sign the agreement. Every method may be used to delay handing over a copy to the borrower in sufficient time. Some areas you may focus are a) check the “reset clause” incorporated by some banks in their home loan agreements that allows them to change the interest rate in the future, even on fixed rate loans. Banks may set their reset clauses for 3 or 2 year intervals.  They say a lender cannot have an agreement that a fixed rate is set for the entire tenure of 15 to 20 years as this will cause an asset-liability mismatch. Talk to your bank. b) Please seek clarifications on the term “exceptional circumstances” (if stated in the loan agreement) under which loan rates can be unilaterally changed by your bank. c) A common person thinks that default ideally means non-payment of one or more loan installments. In some loan documentation it can include divorce and death (in individual case) and even involvement in civil litigation or criminal offence. d) Does the loan agreement say that disbursement of the loan may be made directly to the builder or developer and in the case of a ready-built property to the vendor thereof and/or in such other manner as may be decided solely by bank? It is the borrower whose original property papers are retained with the bank, so why disburse to the builder. Possession of property has been  delayed in some cases when the cheque was issued in the name of the builder and the builder refused to pay delay penalty to the borrower e) Does the agreement enable assignment of your loan to a third party?  You take into account reputation and credibility of the bank before entering into a loan agreement with it. Are you comfortable with third party takes over or should you also be allowed to move your home loan from one bank to another in that case? Look for ambiguous clauses and discuss with the banker. Some agreements say changes in employment etc. have to be informed well in advance without quantifying the term “well in advance”. f) In one case the loan documentation says “issuance of pre-approval letter should not be construed as a commitment by the bank to grant the housing loan and processing fees is not re-fundable even if the home loan is not processed”. This is never ending it seems. The above are only indicative instances of what has been observed / reported/ indicated by various sources. However, our main objective was to get you into the habit of reading the fine print. If you have read this, you would have understood the importance of reading fine print in any document and we have achieved our objective. I only wish I could have made the print smaller as in the real cases.

In terms of Section 25 of the RBI Act, the design, form and material of bank notes shall be such as may be approved by the Central Government after consideration of the recommendations made by Central Board.

Para 5.1.25 of Master Direction – Reserve Bank of India (Non-Banking Financial Company – Scale Based Regulation) 2023 (as amended from time to time) defines ‘Owned Fund’ as aggregate of the paid-up equity capital, preference shares which are compulsorily convertible into equity, free reserves, balance in share premium account and capital reserves representing surplus arising out of sale proceeds of asset, excluding reserves created by revaluation of asset; as reduced by accumulated balance of loss, book value of intangible assets and deferred revenue expenditure, if any.
'Net Owned Fund' is defined under Section 45-IA(7) of the RBI Act, 1934. As per this definition, the Net Owned Fund means–
(a) aggregate of the paid-up equity capital and free reserves as disclosed in the latest balance-sheet of the company after deducting there from, accumulated balance of loss, deferred revenue expenditure, and other intangible assets; and

(b) further reduced by the amounts representing investments of such company in shares of its subsidiaries, companies in the same group, all other NBFCs, and the book value of debentures, bonds, outstanding loans & advances (including hire purchase and lease finance) made to, and deposits with subsidiaries of such company and companies in the same group, to the extent such book value exceeds 10% of (a) above.

Ans: CICs that (a) have an asset size of less than ₹100 crore irrespective of whether they are accessing public funds or not and (b) have an asset size of ₹ 100 crore and above and are not accessing public funds have been exempt from registration with the Bank under Section 45IA of the RBI Act, 1934 in terms of Master Direction DoR(NBFC).PD.003/03.10.119/2016-17 dated August 25, 2016. Thus, they are not required to register with the Bank at all. As this is an exemption given under Section 45NC of the RBI Act, 1934, they are not required to approach the Bank at all.

Ans: Debt securities are negotiable instruments serving as evidence of a debt. They include bills, bonds, notes, negotiable certificates of deposit, commercial paper, debentures, asset-backed securities, money market instruments, and similar instruments normally traded in the financial markets.