Executive summary

In general, all types of activities which are of a financial nature

could be brought under the term financial services. The term Financial

Services in broad sense means mobilizing & allocating savings. Thus, it

includes all activities involved in the transformation of saving into investment.

The financial service can also called financial intermediation. A well

developed financial services industry is absolutely necessary to mobiles the

savings & to allocate them to various investable channels & thereby to

promote industrial development in a country.

Banks provides various financial services to all levels of customers. In

order to provide services to all level of customer, bank also started providing

services to senior citizens. In today’s scenario banks not only limited only

particular boundaries of nation, thank to globalization & liberalization. It

provides various benefits to the county by mobilizing transfer of funds,

liberalization of interest rates of bans etc.

Senior citizens are also the part of the economy. They are most valuable

customers, so that due care should be taken by banks in order to provide

services to them. Banks should be find out the needs of them & accordingly

provides services.

In India, the literacy rate is very low, it also includes senior citizens. In

order to aware the senior citizens about the schemes necessary steps should be

taken by banks. If they can aware about such facilities, they can avail various

services provided by banks.

In this project provides detail information about various schemes which

are available to senior citizens & how it is beneficiary to them.

1

Introduction

The most common cause of fear of old age is associated with the possibility of

poverty.

- Napoleon Hill.

Death is not the biggest fear we have; our biggest fear is the risk to be alive- the

risk to be alive & express what we really are.

-Don Miguel Ruiz.

Man fear for three things in life. They are fear of sickness; fear of

dependence & the fear of old age. Old age does not come all alone. It brings so

many other problems & fears along with it. The old age is more prone to the

above risks & the risk bearing capacity becomes almost zero during the

advancing age. Throughout the life of a man, food, clothing & shelter remain

three basic necessities & they never lose significance or priority. Between the

first & the last breath, a man struggles for getting these three things for himself

& his family.

Banks provides various services to all categories of the customers.

There are various products/ services to the citizens. Separate schemes available

for women, children etc. In order to diversify the activities to all level of

customers, banks also provides different facilities to the senior citizens.

In 2000, Indian population was 1014 (in millions) whereas in 2030 it will

be 1437(in millions). In 2030, 9% of India’s population, or nearly 130 million

people, will be over 65 years of age.

Year 2000 2030

Population over 65 years (%) 4.6 9.0

2

Banks provides various facilities to senior citizens. It includes various

schemes such as deposit, loan schemes, Reverse mortgage loan, senior citizens

savings schemes, 2004 etc. which are beneficiary to senior citizens.

Objective

To know about the banking products/ services for senior citizens.

To understand, how it is beneficiary to senior citizens.

To find out if they are aware about such banking products/ services.

Research & Methodology

Direct information from Assistant Manager, Special assistant of State

Bank of India & Officer of Canara Bank provides answers of questionnaire.

From such useful information, analysis has been done.

For the customer survey, question asked & accordingly analysis have

been done.

Facilities provided available to the senior citizens

Senior Citizens Savings Account, 2004

Reverse Mortgage Loan

Senior citizens account (HDFC BANK)

United Personal Loan Schemes for Pensioners (UCO BANK)

United Housing Loan Scheme for Pensioners (UCO BANK)

Deposit schemes

Loan to pensioner

3

Senior Citizens Savings Scheme, 2004

Government of India had launched the Senior Citizens Savings Scheme, 2004

(SCSS) with attractive interest rate exclusively for the benefit of senior citizens,

with effect from August 2, 2004. Senior Citizens Savings Scheme accounts can be

opened with Post Offices and Agency banks.

The salient features of the Senior Citizens Savings Scheme, 2004 are:

Tenure of the scheme 5 years which can be extended by 3

more years

Rate of interest 9 per cent per annum

Frequency of computing interest Quarterly

Taxability interest is fully taxable

Whether TDS is applicable Yes, Tax will be deducted at source

Minimum investment limit Rs. 1000/-

Maximum investment limit Rs. 15 lakh

Minimum eligible age for investment 60 years (55 years for those who have

retired on superannuation or under a

voluntary or special voluntary scheme).

The retired personnel of Defence

Services (excluding Civilian Defence

Employees) shall be eligible to invest

irrespective of the age limits subject to

the fulfillment of other specified

conditions

Premature withdrawal facility Available after one year of holding but

with penalty

Transferability feature Not transferable to others

4

Tradability Not tradable

Nomination facility Nomination facility is available

Modes of holding Accounts can be held both in single and

joint holding modes. Joint holding is

allowed but only with spouse

Features of Senior Citizens Savings Schemes:

Eligibility

a) An individual who has attained the age of 60 years and above on the date of

opening of an account , or on whose behalf, money is deposited in an account

under these rules, or

b) Who has attained the age of 55 years or more but less than 60 years, and who

has retired on superannuation or under a voluntary or special voluntary

scheme or otherwise on the date of opening of an account under these rules.

c) The retired personnel of Defence Services (excluding civilian Defence

employees) irrespective of the above age limits subject to fulfillment of other

specified conditions. (The Senior Citizens Savings Scheme (Amendment)

Rules, 2004 notified on October 27, 2004).

Investment

The deposits can be made only in the multiples of Rs. 1,000 and the

maximum limit for a deposit has been restricted to Rs. 15,00,000. One

important condition is that if a person opens multiple accounts for making

more than one deposits, the total amount of all the deposits should not cross

the maximum limit of Rs. 15,00,000.

5

Interest on Deposit

The deposit made under these rules shall bear interest @ 9 % p.a. from the

date of deposit payable at the end of each calendar quarter e.g. 31st March /

30th June / 30th September / 31st December.

Tenure of the scheme

While maturity period will not be less than five years, it can be extended by a

further period of three years by an application within one year of maturity.

Even if there is no application, such extension will be presumed and deposit

continued.

Transferability feature

Not transferable to others.

Tradability

Not tradable.

Closure of account

a) The deposit made at the time of opening of account shall be paid by the

deposit office at which the account stands to the depositor on or after expiry

of five years from the date of the opening of the account on production of the

pass book accompanied by a written application (withdrawal form) in

FORM-E.

b) In case the depositor does not close the account on maturity as specified

under sub-rule (1), and also does not extend the account under rule 4(3), the

account shall be treated as matured and the depositor will be entitled to close

the account at any time subject to the condition that post maturity interest as

prescribed under rule 7(9), shall only be admissible for the period beyond

maturity.

6

c) In case of death of a depositor before maturity, the account shall be closed

and deposit refunded on an application in FORM-F, along with interest till

the end of the month preceding the month in which refund is made, to the

nominee or legal heirs in case the nominee has also expired or nomination, as

provided in rule 6, was not made, as the case may be:

Provided that in case of a joint account, or where the spouse is the sole

nominee, the spouse may continue the account on the same terms and

conditions as specified under these rules:

Provided further that in case the spouse does not continue the joint

account, the account shall be closed on an application in FORM-F

and the deposit refunded along with interest as above.

Provided also that where both the spouses have opened separate

accounts under the scheme, and either of the spouses dies during

the currency of the account(s) under the scheme, the account(s)

standing in the name of the deceased depositor/spouse shall not be

continued in accordance with the first provision and such accounts

shall be closed.

d) Where there is no nomination in force at the time of death of the depositor,

the amount standing to the credit of the deceased depositor shall be paid by

the deposit office to the legal heirs of the deceased depositor on receipt of an

application in FORM-F along with a certificate of death of the depositor and

a succession certificate or Letter of Administration with attested copy of

probated will of the deceased depositor issued under the provisions of the

Indian Succession Act, 1925 (39 of 1925).

Provided that the total amount including interest, payable up to rupees

one lakh may be paid to the legal heirs on production of (i) a letter of

indemnity, (ii) an affidavit, (iii) a letter of disclaimer on affidavit, and

7

(iv) a certificate of death of the depositor on stamped paper, in the

forms as in Annexure to Form-F.

e) No deduction, as specified under rule 9, shall be made in case of

premature closure of an account at any time due to death of a depositor.

Premature withdrawal facility

Notwithstanding anything contained in sub-rule (2) of rule 4, on an

application in FORM-E, in this regard, the depositor may be permitted to

withdraw the deposit and close the account at any time after the expiry of one

year from the date of opening of the account subject to the following

conditions, namely:-

In case the account is closed after the expiry of one year but before

the expiry of two years from the date of opening of the account, an

amount equal to one and a half per cent of the deposit shall be

deducted and the balance paid to the depositor.

In case the account is closed on or after the expiry of two years

from the date of opening of the account, an amount equal to one per

cent of the deposit shall be deducted and the balance paid to the

depositor.

The depositor availing the facility of extension of account under

Rule 4 (3) may be permitted to withdraw the deposit and close the

account at any time after the expiry of one year from the date of

extension of the account without any deduction.

Nomination facility

a) The depositor may at the time of opening of the account under these rules,

nominate a person or persons who, in the event of death of the depositor,

shall be entitled to payment due on the account [Rule 6 (1)].

8

b) If such nomination is not made at the time of opening of the account, it may

be made by the depositor at any time after the opening of the account but

before its closure, by an application in FORM-C, accompanied by the pass

book to the deposit office [Rule 6 (2)].

c) The nomination made by the depositor may be cancelled or varied by a fresh

nomination in FORM-C to the deposit office where the account is being

maintained [Rule 6 (3)].

d) Nomination facility shall be available in the case of joint account also.

However, in such case, the joint holder will be the first person entitled to

receive the amount payable in the event of death of the depositor. The

nominee’s claim shall arise only after the death of both the joint holder [Rule

6 (4)].

Transfer of account from one deposit office to another

A depositor may apply on FORM-G, enclosing the pass book thereto, for

transfer of his account from one deposit office to another in case of change of

residence. If the deposit amount is rupees one lakh or above, a transfer fee of

rupees five per lakh of deposit for the first transfer and rupees ten per lakh of

deposit for the second and subsequent transfers shall be payable.

Deposits by Non-Resident Indians (NRIs) and Hindu Undivided Families

(HUF)

a) The Non Resident Indians are not eligible to open an account under these

rules:

If a depositor becomes a Non-resident Indian subsequent to his opening the

account and during the currency of the account under the SCSS Rules, the

account may be allowed to continue till maturity, on a non-repatriation basis

and the account shall be marked as a Non-Resident account.

9

b) Hindu Undivided Family is also not eligible to open an account under these

rules.

Mode of deposit

a) In cash, if the amount of deposit is less than rupees one lakh.

b) By cheque or demand draft drawn in favour of the depositor and endorsed

in favour of the deposit office.

Modes of holding

a) Joint account under the SCSS, 2004 can be opened only with the spouse

[ Rule 3 (3)]

b) In case of a joint account, the age of the first applicant / depositor is the only

factor to decide the eligibility to invest under the scheme. There is no age

bar/limit for the second applicant / joint holder (i.e. spouse) [Rule 3 (3)]

c) Both the spouses can open individual and / or joint accounts with each other

with the maximum deposits up to Rs.15 lakh each, provided both are

individually eligible to invest under relevant provisions of the Rules

governing the scheme (Rules 3 and 4 ).

Taxability

Interest is fully taxable

Tax Deductable at Source (TDS)

a) TDS is applicable to the scheme as interest payments have not been

exempted from deduction of tax at source.

b) Tax is to be deducted at source if the interest paid or payable exceeds

Rs.5000/- during the financial year.

c) The rate for TDS for a financial year is specified in Part II of Schedule I of

the Finance Act for that year. The prescribed rate for the financial year 2006-

2007 are as under :

In the case of a person other than a company:

10

Person resident in India – 10 %

Others – 20 %

The amount so deductible shall be enhanced by surcharge calculated as per

the following rate:

In the case of Individual, HUF, Association of Person and Body of

Individuals – 10% if the interest paid / payable exceeds Rs.1000000/-.

Names of banks handling SCSS

At present there are 24 nationalized banks and one private sector bank &

their designated branches of these banks have been authorized to handle SCSS,

2004. The list is given below:

State Bank of India

State Bank of Hyderabad

State Bank of Indore

State Bank of Bikaner and Jaipur

State Bank of Patiala

State Bank of Saurashtra

State Bank of Mysore

State Bank of Travancore

Allahabad Bank

Bank of Baroda

Bank of India

Bank of Maharashtra

Canara Bank

Central Bank of India

Corporation Bank

11

Dena Bank

Indian Bank

Indian Overseas Bank

Punjab National Bank

Syndicate Bank

UCO Bank

Union Bank of India

United Bank of India

Vijaya Bank

ICICI Bank Ltd.

Reverse Mortgage Loan

Reverse mortgage loan offers lifeline to the senior citizens. Finance

Ministry P Chidambaram proposed the introduction of an innovative product-

Reverse mortgage facility- in the union budget 2007-08 for the benefit of senior

citizens. The house property is the most valuable asset in anyone’s life. But

entire capital of an immovable property & the proud homeowners become asset-

rich & cash- poor, always finding it difficult to strike a balance between the

increasing inflation & poor cash flows.

Reverse mortgage is powerful financial tool which can be used to

overcome the elderly people’s regular financial problem. Reverse mortgage is

one of the financial products that offers regular stream of cash flows to senior

12

citizens to meet their monetary requirements. It bears the regular interest of 10 to

11% in India.

Reverse mortgage does not involve any transfer of property & the amount

generated through this scheme is loan & not income, hence it is not taxable.

In India, only 2000 senior citizens across the country have utilized this

scheme as it has not appealingly packaged. According to the economic

predictions, the current potential of reverse mortgage market is $ 40 bn.

Eligibility criteria

The senior citizen should have at least 60 years of age/ if they are couples

one among them should be of 60 years of age.

He/ she/ they should possess self occupied own house which should be

used for primary residence purpose by them.

It should be liberated from legal burden.

It should have enduring life of 20 years.

End Use of Loan

There is no restriction or guidelines for the end use of loan. The borrowed

amount can be utilized for the following purposes.

To renovate, upgrade & to extend the existing house property.

To pay back the already obtained loan for mortgaging the residential

property.

To meet any real & legitimate need.

To meet medical & emergency expenses.

To substitute the regular income/ pension.

Pros and Cons of Reverse Mortgage

13

The merits & demerits of a RML scheme has to understood by every senior citizen

before they enter into these arrangements as their major amounts would be invested

in the house at the time of their retirement and it is very tough to liquidate the

investment when is required for meeting any urgency.

Pros

The senior citizen can avail the loan without transferring the ownership of the

house property.

No repayment of loan is required as long as the senior citizen live in the

mortgaged house.

Income generated from reverse mortgage is tax free.

This loan is exempted from capital gain, wealth tax.

No restriction on the usage of loan amount.

Interest is being charged only on the loan amount which has on the loan

amount which has been received.

There are numerous chances for the appreciation of house value as the real

estate market is growing in India. So if the senior citizen has decided to avail

the reverse mortgage loan, he/ she is leaving a high equity to his/ her heirs.

As there is no age limit for availing this loan, senior citizen can avail the loan

at any time. Moreover, more old people can easily avail the loan.

The lender has right only on the home, if the loan is required to be paid off.

The owner is allowed to value the property in the initial stage.

Cons

14

Cost of loan i.e., the interest charged on the loan is very high. Future the

borrower has to incur some more cost in addition to the interest known as

closing cost such as loan processing charges, cost of documentation &

commitment charges on undrawn loan amount.

There is a chance for the mortgage loan may eat equity in the loan.

In India, the maximum amount of loan is restricted to a cap of Rs. 50 lakh, &

a period of 15 years. So at the end of maturity period or the death of the

senior citizens whichever is earlier, the loan amount has to be repaid with the

interest amount. If any of the senior citizens outlive the tenure period,

through he/ she will not be asked to move out of the home, it is considered to

be very tough to dispose the house for them.

There is no clarity regarding the terms & conditions.

Reverse mortgage loan is not suitable for short term purposes

The termination fee is considered to be very high, if any person decides to

repay the loan before the maturity period.

The person who lives with the only & only one owner of the reverse

mortgage loan scheme cannot continue to live in the home after the death of

the owner.

Senior citizens account

15

Eligibility

All resident individuals (sole or joint) in the age group of 60 years and above

are eligible to open the Senior Citizens Account.

In case of joint accounts, the first applicant has to be a senior citizen (>= 60

years of age)

Account Operation

A minimum deposit of Rs. 5,000/- is required to open a Senior Citizens

Account and thereafter an Average Quarterly Balance (AQB) of the same

amount has to be maintained.

Non-maintenance of required AQB will invite charges of Rs.250/- per

quarter.

Transaction charges will be applicable in case the specified AQB has not

been maintained in the previous quarter.

Features & Benefits

Shop with pride with your Easy Shop International Debit Card offered free

for life to the first applicant. Shop (Point of Sale limit) up to Rs.25,000/- per

day.

Enjoy an enhanced cash withdrawal limit of Rs.25,000/- per day on the Debit

Card for withdrawals at any HDFC Bank ATM.

Note: If the first applicant is a woman and new to the bank, our special

Woman's Advantage Debit Card with ATM cash withdrawal limit

Rs.20,000/- per day and shopping (Point Of Sale) limit of Rs.30,000/- per day

will be issued free by default.

Free cash withdrawals on any other Bank's ATM

16

Payable-at-Par (PAP) cheque books are issued free. With this facility,

outstation cheques issued by you (for clearing) will be treated as local

cheques, at any HDFC Bank location.

What's more, enjoy free PAP usage up to Rs.50,000/- per month. A nominal

charge of Re.1/- per 1000 will apply above Rs.50,000/- on the full amount.

Keep a close eye on your account with the monthly account statements

offered free OR

Avail of free Passbook facility at your account branch.

Use the third party cash transaction facility at non-account branches, to have

your near and dear ones deposit / withdraw cash up to Rs.50,000/- per day on

your behalf for free. Above Rs 50,000 a charge of Rs 2.90/- per 1000 on the

full amount would be applicable.

Use our Phone Banking, Mobile Banking and Net Banking facilities offered

free to reach us with ease.

Avail free SMS alerts to know the transactions in your account.

Free Email Statement facility and National Electronic Funds Transfer facility

available.

Special offers and benefits

Get preferential rates on FDs

Special offers on new Demat Accounts

Annual Maintenance Charge (AMC) waived off for the first year

50% AMC from second year onwards

Dematerialization of physical shares free for lifetime

(The offer is applicable only for the 1st Demat account linked to the Senior

Citizens Savings Account)

Special offers on new Online Trading Accounts

Account opening charges Rs.499/- only

17

5 trades free .Valid for the next 3 months from the date of account opening

Gold Credit Card free

Travellers’ Cheques issued free

Insurance Benefits

Get Accidental Hospitalization cover of Rs.50,000/- per annum. This is a

reimbursement cover for the first applicant.

Senior citizens can also claim daily cash allowance* once a year (at Rs.500/-

per day for a maximum of 15 days per year) for each day of hospitalization

due to an accident.

Senior citizens claim will be processed only if you have used your HDFC

Bank Debit Card for purchase at a Merchant Establishment at least once in

the previous 6 months from the month of your accident.

United Personal Loan Schemes (FOR PENSIONERS)

18

Purpose

To provide short term loan to the pensioners to meet their family and

personal expenses.

Target group

All pensioners of Central and State Govt. Undertakings/ Public Sector

Undertakings/ Defence Services / Reputed Companies/ Educational

institutions (Universities, Institutes, Schools and Colleges)/ Banks drawing

pension from the branches of the Bank.

Eligibility

Entire loan is to be repaid before pensioner's attaining seventy five years of

age.

Quantum of loan

A maximum of twelve months net pension subject to a maximum of Rs.1.00

lakh.

Margin

Nil.

Processing charge

1% of the loan amount.

Repayment

(i) Maximum of 48 EMIs where the pensioner is below 70 years.

(ii) Maximum of 36 EMIs where the pensioner is above 70 years.

Pre payment charges

Nil

United Housing Loan Scheme for Pensioners

19

Eligibility

All pensioners of Central and State Governments, Central and State

Governments Undertakings, Defence Services, reputed Companies,

Educational Institutions (Universities, Institutes, Schools and Colleges)

including pensioners (VR and VRS) of United Bank of India.

Monthly Net Pension

Min. Rs.5,000/-

Entry Age

Max. 70 years

The pensioner must be physically fit and mentally alert to execute the

documents. Person(s) in paralytic condition or bed-ridden is/ are not eligible

for the loan.

Purpose

Renovation/ extension/ repair/ furnishing of self-occupied house/ flat;

Purchase/ construction of new house/ flat;

Purchase of old house/ flat not old over 35 years from the date of

completion of construction.

Securing shelter in any "Old-Age Home"

Quantum of Loan Maximum Rs. 2 lakh provided total deduction including

EMI of the loan must not exceed 40% of the borrowers' net monthly pension. If

spouse becomes co-borrower and if he/she is also pensioner drawing pension from

20

the branch, pension of both of them shall be considered for determining the

quantum of loan within the overall ceiling.

Repayment Period Entire loan has to be liquidated before borrower's attaining

75 years of age (subject to ceiling of 10 years repayment period). The age of the

1st pensioner or from whose income (also service holder/ pensioner), the major

recovery of loan will be made, shall be the deciding factor for the period of loan.

However, where loan is extended for getting shelter in "Old -Age Home" total

repayment period including the extended period must not exceed 10 years (120

EMI).

Deposit Scheme for senior citizens

Banks have been permitted to formulate, with the approval of their Boards, fixed

deposit schemes specifically for resident Indian senior citizens offering higher and

fixed rates of interest as compared to normal deposits of any size. These schemes

should also incorporate simplified procedures for automatic transfer of deposits to

nominee of such depositors in the event of death. Deposits over five year have

enjoy tax exemption under 80C. TDS is applicable unless Form 15 H is submitted

to the bank. Since RBI receives many complaints that tax is deducted, senior

citizens would do well to file Form 15 H in time.

Facilities for pensioners

21

Almost all the pensioners, by virtue of the retirement age fixed by the

Government, are senior citizens. The following facilities, among other, are available

to pensioners:

Credit of pension to pensioners’ accounts on last 4 days of month so that the

pensioner can draw pension on the 1st day of the next month itself.

Joint account with spouse allowed.

Pension slips to be issued at first time and thereafter whenever there is a change.

For incapacitated pensioners - branch to depute an officer to the residence of the

pensioner for getting/certifying the life certificate.

Banks to accept nominations furnished by pensioners in Form ‘A’ or ‘B’ in respect

of payment of arrears of pension of the deceased pensioner.

RBI has issued necessary instructions to all the banks disbursing pension to

ensure that the pensioners get the best possible customer service. Most of the

agency banks have since set up Centralized Pension Processing Centers (CPPCs)

which will be responsible for receipt of the Pension Payment Orders (PPOs),

calculation of pension/Dearness Relief etc. and crediting the amount directly to the

pensioners’ accounts through this system.

RBI Guidelines

1. Reverse mortgage loan

RBI likely to issue norms for reverse mortgage in credit policy meet The

Reserve Bank of India (RBI) on April 29 in its forthcoming annual monetary

22

policy meeting is likely to announce the prudential norms for reverse mortgage

loans to safeguard banks in a falling real estate market. Reverse mortgage scheme

was announced by the Union Finance Minister P. Chidambaram in the Finance

Bill 2007 as a social security measure for the elderly.

Recently, National Housing Bank (NHB), a subsidiary of Reserve Bank of

India (RBI), announced its final operational guidelines on reverse mortgage.

Following are some of the key features of the scheme:

The facility will be made available to those above the age of 60 years;

Joint ownership with spouse is also permitted even if one of the borrowers

is below 60.

The scheme applies only to self-acquired and self-occupied properties,

owned by senior citizens and having a residual life of at least 20 years.

The amount of loan would depend on the market value of residential

property, as assessed by the primary lending institution (PLI), age of

borrower and prevalent interest rate.

The PLI should ensure that the borrower’s equity in the residential

property does not fall below 10% during the tenor of the loan.

The borrower will not be required to pay any penalty towards prepayment

of loan.

The lending institutions can frame their respective internal policy

guidelines but the same should be fully disclosed to the potential

borrowers upfront.

The amount received through reverse mortgage is considered as loan and

not income; hence the same will not attract any tax liability.

2. Facilities for pensioners

23

RBI has issued necessary instructions to all the banks disbursing pension

to ensure that the pensioners get the best possible customer service.

Banks to access the Government website and effect payment of revised

Dearness Relief without waiting for RBI instructions.

STATE BANK OF INDIA

The State Bank of India, the country’s oldest Bank and a premier in

terms of balance sheet size, number of branches, market capitalization and

profits is today going through a momentous phase of Change and

Transformation – the two hundred year old Public sector behemoth is today

stirring out of its Public Sector legacy and moving with an ability to give the

24

Private and Foreign Banks a run for their money. The origin of the state bank

of India goes back to the first decade of the nineteenth century with the

establishment of the Bank of Calcutta in Calcutta on 2 June 1806.

SBI PLAN FOR SENIOR CITIZEN (DEPOSITE SCHEME)

Purpose

To provides a deposit Scheme with Differential rate to senior citizens.

Eligibility

Applicant senior citizens i.e. resident with age of 60 year or above on the

date of acceptance of deposit availability at all branch accepting ' personal

segment' deposit.

Type of Deposit

Term deposit/Special term deposit

Tenure of deposit

1year and above.

Minimum amount

Rs. 10000 and thereafter in multiples of Rs.1000.

Payment of interest

At the time of maturity or at quarterly intervals or monthly interval (at

discount rate), as specified by the depositor.

Premature withdrawal

a) It is permitted subject to 1 if the term deposit, having tenure of less than 3

years, is withdrawn before the expiry of contract period then interest will

25

be paid at the rate applicable to normal term deposit of the bank for

period actually run.

b) If the deposit is withdrawn after 3 years then the interest will be paid at

contracted rate less o.50%.

DEPOSITS OF Resident Indian SENIOR CITIZENS

(Age 60 years and above)

For deposits below Rs One Core

Tenors Existing w.e.f.

27.07.2009

Tenors Revised w.e.f.

08.09.2009

15 days to 45 days 3.00 15 days to 45

days

3.00

46 days to 90 days 4.00 46 days to 90

days

4.00

91 days to 180

days

5.25 91 days to 180

days

5.25

181 days to less

than 1 year

6.00 181 days to less

than 1 year

6.00

1 year to less than

2 years

7.00 1 year to less

than 2 years

7.00

1001 days to less

than 3 years

7.50

2 years to less

than 3 years

7.50

1001 days 7.75

1001 days to less

than 3 years

7.50

3 year to less than 7.75 3 year to less 7.75

26

5 years than 5 years

5 years to less

than 8 years

8.00 5 years to less

than 8 years

8.00

8 years and up to

10 years

8.25 8 years and up to

10 years

8.25

LOAN TO PENSIONERS

If you are a Central or State Government pensioner drawing your pension

through one of State Bank of India branches and are not more than 72 years of age,

customer can avail of a loan from SBI branch to meet your personal expenses. Bank

understands that customer may have an urgent or unexpected need for funds or a

family obligation to be fulfilled .Customer can avail a loan of up to a maximum of

12 months pension, subject to a ceiling of Rs.1,00,000. The documentation is easy.

The loan may be repaid over 5 years and will carry a low interest rate of

12.75% p.a.

There are no processing fees, no hidden costs and no prepayment penalties.

Whenever bank has some surplus funds, customer can credit his/ her loan account;

thereby customer can reduce loan liability and interest burden.

Salient features of the Scheme

Eligibility

All Central and State Government pensioners, whose pension accounts are

maintained by bank branches. The pensioner should not be more than 72

years of age.

27

Purpose

To meet personal expenses.

Loan Amount

A maximum of 12 months pension with a ceiling of Rs.1,00,000/-

Margin

Nil

Security

The spouse eligible for family pension should guarantee the loan or any

other family member or a third party worth the loan amount.

Repayment

60 Equated Monthly Instalments (EMIs) – if age of Pensioner at the time

of loan sanction is up to 70 years

48 Equated Monthly Instalments (EMIs) – if age of Pensioner at the time

of sanction is between 70 – 72 years

Rate of Interest

0.50% above SBAR floating i.e. 12.75% p.a. (w.e.f. 01.01.2009)

Authorized Branches

All branches maintaining pension accounts. The facility is available only

from the branch which is maintaining pension account of the applicant.

Benefits are available to the pensioners

All processes are automated, and the pensioner gets timely and accurate

payment of pension within the time specified by the Government (e.g., first

date of the month for State Govt. pensioners).

28

Delays on account of de-centralization due to delays in receipt of instructions

from the Pension Paying Authority on D.A revision, payment and /or

restoration of commutation etc. and in calculation thereof are now eliminated.

SBI REVERSE MORTGAGE LOAN SCHEME (FOR 60+ SENIOR

CITIZENS)

The State Bank of India (SBI) started offering reverse mortgage products for senior

citizen on October 12, 2007.

Objective of the scheme

To provide a source of additional income for senior citizens of India who

own self-acquired and self-occupied house property in India.

Eligibility

a) No. of borrowers

Single or jointly with spouse in case of a living spouse.

b) Age of first borrower

Above 60 years.

c) No. of surviving spouses on the date of sanction of loan-

Should not be more than one. Borrowers will have to give an undertaking

that they will not remarry during the currency of the loan. If the borrowers

choose to remarry, the loan will be foreclosed.

d) Age of spouse

Above 58 years

e) Residence

29

Borrower should be staying at self-acquired and self owned house

/flat against which loan is being raised, as his permanent primary

residence.

Mobile/Telephone/Credit Card bills/ Certificate from the Housing

Society where the borrower is staying / Affidavit made before the

Executive Magistrate may be accepted as proof of residence.

Borrowers will be required to inform the Bank when they cease to

use this residence as their permanent residence.

f) Title of the Property

Borrowers should have a clear and transferable title in their

names.

Title verification and search report for a period of 30 years will

be required to be obtained from the Bank’s empanelled advocate

at borrowers’ cost.

g) Title of the property and number of borrowers.

Case– Title in single name and loan availed jointly with spouse.

Title holder should make a will in favour of the other spouse. The will

should confirm that this is the last Will and that it supersedes all earlier

wills, if any. The borrower to undertake that no fresh will shall be made

during the currency of the loan.

h) Encumbrances

The property should be free from any encumbrances. However in

case of property purchased by availing Home Loan from SBI and

mortgaged to SBI, it will be considered for RML, subject to closure of the

Home Loan account out of the proceeds of RML.

30

i) Residual Life of property

It should be at least 20 years in case of single borrower and 25 years in

case of spouse being below 60 years of age.

Borrower Life of property( in year)

single borrower 20

Spouse being below 60 years of age 25

Certificate from empanelled engineer/architect will be required to be

obtained for this purpose, in addition to valuation of property.

Security

The RML shall be secured by way of equitable mortgage of residential

property

Tenor

Age of the younger of the borrowers

Between 58 and up to 68 years: 15 years

Age of the younger of the borrowers

Above 68years:10 years

OR till death of the borrower(s), whichever is earlier.

Disbursement

By credit to an SB account in the joint names of the borrowers operated

by E or S.

Periodicity of availing loan

a) Monthly / quarterly payments

31

b) Lump sum payment

Quantum of loan

The loan amount would be 90% of the value of property. Loan amount

would include interest till maturity. The loan installments payable to the

borrower(s) would be as under for a loan amount of Rs.1 lakh (at interest

rate of 10.75% p.a.):

The maximum loan amount is kept at Rs.1 Crore (monthly payment

Rs.22,500/- for 15 years) and minimum Rs.3 lakh (monthly payment

Rs.675/- for 15 years).

Example of arriving at the monthly installments:

Property value: Rs.10 lakh

Qualifying loan amount

Quantum of loan

(90% of property value):Rs.9 lakh

32

Tenor: 15 years

Monthly installment: Rs. 225 x 9 = Rs.2, 025/-

Purpose of Loan

For supplementing income, any personal expenses, house repairs, etc.

Loan amount should not be used for speculative, trading and business

purposes.

Repayment/Settlement

a) The loan shall become due and payable only when the last surviving

borrower dies or opts to sell the home, or permanently moves out of the

home for to an institution or to relatives. Typically, a "permanent move"

may generally mean that neither the borrower nor any other co-borrower

has lived in the house continuously for one year or do not intend to live

continuously. Bank may obtain such documentary evidence as may be

deemed appropriate for the purpose.

b) Settlement of loan along with accumulated interest is to be met by the

proceeds received out of sale of residential property or prepayment by

borrowers and his next of kin.

c) The borrower(s) or his/her/their legal heirs / estate shall be provided with

the first right to settle the loan along with accumulated interest, without

sale of property.

d) A reasonable amount of time, say up to 6 months, may be provided when

RML repayment is triggered, for house to be sold.

e) The balance surplus (if any), remaining after settlement of the loan with

accrued interest and expenses, shall be passed on to the borrower or the

estate of the borrower/legal heirs.

33

f) Borrowers will be required to submit annual life certificates in the month

of November every year. This certificate will also include clauses

regarding marital status, and permanent residence of the borrowers, in

addition to the balance confirmation as on 31st October of that year.

g) List of legal heirs will be obtained at the time of sanction of loan. With a

view to avoiding disputes at the time of settlement of loan amount by

legal heirs, specific instructions about inheritance of the property and

payment of balance amount, if any, of the sale proceeds after settling the

Bank’s dues, will be required to be part of the borrowers’ Will.

Foreclosure

The loan shall be liable for foreclosure due to occurrence of the following

events of default.

a) If the borrower(s) has/have not stayed in the property for a continuous

period of one year.

b) If the borrower(s) fail(s) to pay property taxes or maintain and repair the

residential property or fail(s) to keep the home insured, the Bank reserves

the right to insist on repayment of loan by bringing the Residential

property to sale and utilizing the sale proceeds to meet the outstanding

balance of principal and interest.

c) If borrower(s) declare himself/herself/themselves bankrupt.

d) If the residential property so mortgaged to the Bank is donated or

abandoned by the borrower(s).

e) If the borrower(s) effect changes in the residential property that affect the

security of the loan for the lender. For example: renting out part or all of

the house by creating a tenancy right; adding a new owner to the house's

title; changing the house's zoning classification; or creating further

34

encumbrance on the property either by way of taking out new debt against

the residential property or alienating the interest by way of a gift or will.

f) Due to perpetration of fraud or misrepresentation by the borrower(s).

g) If the government under statutory provisions, seeks to acquire the

residential property for public use.

h) If the government condemns the residential property (for example, for

health or safety reasons).

i) Any other event such as re-marriage of the borrower(s) etc which shall

have an adverse impact on the loan settlement prospects.

j) Borrowers do not accept the revised terms on revaluation of property and

interest reset at the end of every 5 years from sanction.

Pre-payment of loan

a) The borrower(s) will have option to prepay the loan at any time during the

loan tenor.

b) There will be no prepayment penalty.

Valuation/Revaluation of property and option for the Bank to adjust

payments

a) After the initial valuation to determine the loan amount, subsequent

revaluations will be done at intervals of 5 years.

b) The Bank shall have the option to revise the periodic/lump-sum amount

every 5 years along with revaluation. In the scenario of fall in property

prices, the Bank may decide to revise the amount at any time earlier than

5 years. At every stage of revision, it should be ensured that the Loan to

Value ratio does not exceed 90% at maturity.

c) If the Borrower does not accept the revised terms, no further payments

will be effected by the Bank. Interest at the rate agreed before the review

will continue to accrue on the outstanding amount of the loan. The

35

accumulated principal and interest shall become due and payable as

mentioned in clauses 9 and 10.

Interest Rate

10.75% p.a. (Fixed) subject to reset every 5 years.

Processing fee

0.50% of the loan amount, minimum Rs.500/- and maximum of Rs.10,000.

Right of Rescission

As a customer-friendly gesture and in keeping with international best

practices, after the documents have been executed and loan transaction

finalized, borrowers will have right of rescission up to seven days to

cancel the transaction. If the loan amount has been disbursed, the entire

loan amount will need to be repaid by the borrower within this period.

However, interest for the period may be waived. Processing fee shall not

be refunded in such cases.

Insurance and maintenance of house property

a) The house property will be insured by the borrower at his cost against fire,

earthquake and other calamities.

b) The borrower shall ensure to pay all taxes, charges etc.

c) Bank reserves the right to pay insurance premium, taxes, charges etc. by

reducing the loan amount to that extent.

d) The borrower shall maintain the property in good condition

Operational issues

a) Type of facility

36

Non-renewable Overdraft without ledger folio charges. No cheque book /

debit card will be linked to this account.

b) Availability of product

All branches.

37

CANARA BANK Fund in 1906, this small business blossomed into a

limited company called Canara Bank Limited in 1910. In 1969, fourteen

major banks in the country were nationalized; Canara Bank was one of them.

Canara Bank soon launched into a massive expansion drive. By the early

1980s the shape that Canara Bank was finally going to take began to emerge.

Canara Bank is one of the most proactive public sector banks. It has led not

just in exploiting technology to create greater efficiencies but has also led in

creating new products. Several types of accounts which specifically cater to

the needs of children, high net worth individuals and senior citizens.

ASHRAYA DEPOSIT SCHEME (FOR SENIOR CITIZENS)

Eligible accounts

Domestic Fixed Deposits

Kamadhenus Deposits.

Eligibility

Individuals, who have completed the age of 60 years and above, in single

or joint names.

In case of joint account, accounts can be opened jointly with other Senior

Citizens or with other persons below the age of 60 subject to the condition

that the Senior Citizen is No.1 depositor

Investment

Minimum Rs. 1000/-

Maximum - No ceiling (Can be deposited in odd amount also)

Period of Deposit

38

15 days to 120 months Kamadhenu Min. Period – 5 months

Interest rate

Additional 0.50% rate of interest for deposits less than Rs.1 crore.

Periodicity of interest payment

Monthly (discounted) or quarterly on Fixed Deposits

Compounded quarterly on Kamadhenu Deposits

TDS on interest

Applicable

Nomination facility

Available

Loan facility

Available up to 90% of the balance deposit amount

Penalty for pre- mature closure

No penal cut. Wherever preferential rates are extended for bulk deposits

interest payable at base rate for the period run.

Mandatory documents

At the time of opening of new deposit account a certified copy of any of

the following documents may be produced.

Secondary School Leaving Certificate indicating the date of birth.

LIC Policy

Voters Identity Card

Pension Payment Order

Birth Certificate issued by the competent authority

Passport

39

Any other documents acceptable to the Bank

Application & documents

Application Form

Form 60 or 61 (if customer does not have PAN Card)

Photograph of depositor/s (2 copies)

Proof of address as per KYC (Know Your Customer) Norms

Any other related documents as applicable to proprietor ship

concern, Partnership Firm, Company, HUF etc.

KAMADHENU DEPOSIT (Re-investment Plan)

Eligibility

Individual, Joint (not more than 4), a Guardian on behalf of a minor, HUF,

Partnership, a Company, Association or any other Institution

Investment

Minimum Rs.1000/-

Maximum - No ceiling

(Can be deposited in odd amount also)

Period of Deposit

Minimum 5 months

Maximum 120 months

(Can be for odd period also)

Interest rate

40

Depending upon the periodicity of the deposit.

Periodicity of interest payment

On Maturity.

Special rate for senior citizens

Additional 0.50% rate of interest for deposits less than Rs.1 crore.

TDS

Applicable.

Nomination facility

Available.

Loan facility

Available up to 90% of the deposit amount.

Penalty for pre- mature closure

No penal cut.

Extra facility

Facility of part withdrawal of deposits in units of Rs.1000/- keeping

the rest of the deposit to earn contracted rate of interest, available.

Interest compounded quarterly

Application & documents

Application Form

Form 60 or 61 (if customer does not have PAN Card)

Photograph of depositor/s (2 copies)

Proof of address as per KYC Norms

Any other related documents as applicable to proprietor ship

concern, Partnership Firm, Company, HUF etc

41

CAN PENSION (Loan for Senior Citizens)

Purpose

To meet the cost of medical expenses and other genuine needs

Eligibility

Pensioners of Central / State Governments / PSUs / Corporate

Pensioners / Pensioners of Banks provided they all draw pension through

our branches.

Quantum

Ten month's pension amount or 1,00,000/- whichever is lower.

Rate of Interest

12.00%

Repayment

Up to 36 months in EMIs (Equated Monthly Instalments).

Security

Co-obligation of spouse/ suitable person.

CANARA JEEVAN - Reverse Mortgage Loan

The union finance minister during his budget speech for the year 2007-08

had announced formulation of a novel financial product for senior citizens i.e.

Reverse Mortgage Loan. . Reverse Mortgage Loan is a loan that allows owners

42

of residential property to convert their home ownership into cash flows, for

meeting their living & other expenses. Unlike mortgage, which is generally used

to secure finance, Reverse Mortgage converts a self-owned property into

finance.

In the present scenario, for most senior citizens & those nearing retirement

the biggest fear is the need for money to the comfortably after retirement.

Reverse mortgage scheme helps them to convert their dwelling house into liquid

cash flow to meet their living expenses.

This with the above objective of financial needs of the senior citizens, a

new loan scheme is introduced with immediate effect, namely “CANARA

JEEVAN” - Reverse Mortgage Loan Scheme for Senior Citizen.

Feature of the reverse mortgage loan

Objective

To meet the financial need of senior citizens owning self occupied

residential property.

Eligible Borrower

Owners of residential house/ flat, who are residents of India.

Owner of the property should be above 60 year of age.

The loan shall be in the joint name of the borrower & his spouse

irrespective of the title of the property.

In the cases at least one of them should be above 60 years of age & the

spouse/ joint borrower should be more than 55 year of age.

In case of jointly owned properties the joint owner who is aged 60

years shall be the first borrower.

43

The property should be self acquired & self-occupied as permanent

primary residence.

The residential property should be free from any encumbrances.

The residual life of the property should be at least 20 years.

In case of flats the age of the property should not be more than 10

years.

Commercial property will not be eligible for Reverse mortgage loan.

Determination of Eligible Amount of Loan

The amount of loan will depend on market value of residential

property, as assessed by the bank, age of borrower & prevalent interest

rate.

The table given hereunder may serve as an indicative guide for

determining loan eligibility:

A) In respect of Houses:

Age of the borrower Loan as proportion of Assessed Value of Property*

60-65 70%

66-70 70%

71-75 80%

Above 75 90%

*Loan amount including interest till maturity

- In case of independent houses the minimum loan quantum shall be Rs. 5

lakh & the maximum shall be Rs.50 lakh.

B) In respect of flats:

44

Age of the borrower Loan as proportion of Assessed Value of Property*

Age of the flat

Less than 2 year 2 – 5 year 5 – 10 year

60-65 60% 55% 45%

66-70 65% 60% 50%

71-75 70% 65% 55%

Above 75 75% 70% 60%

* Loan amount including interest till maturity.

-The Equity to Value Ratio – VER should not at any time during the tenor of

the loan fall below 10%.

-In respect of flat the maximum quantum shall be 25 lakh.

-Age of the flat should not be above 10 years.

Nature of Payment

Nature of Payment to be decided in advance as part of the Reverse mortgage

loan covenants as under:

Periodic payment (monthly/ quarterly) to be decided mutually

between the bank & the borrower upfront.

One time Lump-sum payment, not more than 20% of the eligible

loan amount.

Lump-sum payment may be made conditional & limited to special

requirements such as medical exigencies up gradation, renovation

& extension of the house etc.

45

Chart showing monthly/ quarterly/ lump sum payments are furnished in the

Annexure II, III & IV to the circular.

Illustration:

Eligible loan amount of Rs. 500000/- for a repayment period of 15 years with rate

of interest @ 10.50% (fixed)

a) If monthly payment is opted for:

Monthly amount payable shall be Rs. 1140 p.m.

b) If 20% of the loan amount i.e. 100000/-is opted in lump sum & balance 80% i.e.

Rs.400000/- in monthly installments:

Lump sum amount payable shall be Rs. 22360/- & the monthly installment

payable by the bank shall be Rs. 912 p.m.

Purpose of the loan

Up gradation, renovation & extension of residential property.

For uses associated with home improvement, maintenance/ insurance

of residential property.

Medical emergency expenditure for maintenance of family.

For supplementing pension/ other income.

Repayment of an existing loan taken for residential property to be

mortgaged.

Meeting any other genuine need.

Use of Reverse mortgage loan for speculative, trading & business

purposes shall not be permitted.

Purpose wise sublimit

46

Purpose Maximum permissible limit as % of the

total eligible loan quantum

a. Up gradation, renovation & extension

of residential property.

b. Repayment of an existing loan for the

residential property to be mortgaged.

c. For uses associated with home

improvement, maintenance/ insurance

of residential property.

d. Medical, emergency expenditure for

maintenance of family

20%

For supplementing pension/ other income 80% as monthly/ quarterly installment

as agreedMeeting any other genuine need

Period of Loan

Maximum 15 years.

Interest Rate

10.50% p.a. (fixed) with reset every three years.

(Canara Jeevan -For fresh loans sanctioned on or after 12.03.2009 up to

31.12.2009. interest rate is 9.50% p.a. (fixed) with reset every three years)

Maturity

Loan shall be secured by way of mortgage of residential property, by way

of Registered Mortgage or equitable mortgage with memorandum of

deposit of title deeds in favour of the bank.

47

Valuation of Residential Property

Valuation of the property is to be done once every three years.

Quantum of loan may undergo revisions in case there is reduction in

the value of the property based on such valuation of property, at the

discretion of the bank.

Loan instalment to be refixed keeping in view applicable Rate of

Interest (ROI) & valuation of property.

No upward revision shall be permitted in either loan amount or

periodical installments payable to the borrower irrespective of increase

in the value of the property.

The bank shall have the option to revise the periodic / lump sum at

such frequency or interval based revaluation of property, which in any

case shall be at least once every three years.

If the Borrower does not accept the revised terms, no further payment

will be effected by the bank. Interest at the rate agreed before review

will continue to accrue on the outstanding amount of the loan.

Disbursement

The loan will be extended as regular monthly/ quarterly cash

advances. Option once exercised monthly or quarterly payment cannot

be changed at a further date.

Lump sum payment to the extent of 20% of the amount arrived at.

In case of periodic disbursement, the payment shall be made during the

loan period of 15 years or till the death the surviving borrower,

whichever is earlier.

The bank will pay the loan proceeds directly to the borrower, in cases

pertaining to retirement of existing deal payments to contractor(s) for

the repairs of borrower’s property, or payment of property taxes or

48

hazard insurance premiums from the borrower’s account set aside for

the purpose.

In case the residential property is already mortgaged to any institution,

the bank may, at its discretion, consider permitting use of part proceeds

of Reverse mortgage loan to prepay/ repay the outstanding with that

institution. The loan amount will be paid directly to that institution to

the extent of the loan outstanding with that institution with a view

release the mortgage.

Repayment of the loan

The loan shall become due & payable only when the last surviving

borrower dies or would like to sell the home, permanently moves out

of the home.

In case of death of one of the borrower, the repayment will take effect

after the death of the surviving borrower.

The entire outstanding liability including accumulated interest to be

met by the proceeds received out of the sale of the mortgaged property

& any surplus to be paid to the heirs.

The borrower(s) or his/ her/ their legal heir/ heirs shall be provided

with the first right to settle the loan along with the accumulated

interest, without sale of property.

Functioning authority

The scheme involves a lot of counseling to be done to the senior citizen

borrowers; the scheme may be implemented through select branches in each

circle, depending upon the potential.

Repayment of Loan by Borrower(s)

49

The Borrower(s) will have option to prepay the loan at any time during

the loan tenor.

Prepayment levy/ penalty/ charge for such prepayments @ 2% of the

outstanding liability shall be discharge in case the closure involves

takeover by other bank/ HFI.

In case the prepayment is out of the borrower(s) own sources no

prepayment penalty shall be levied.

Further in case of closure of the loan either out of borrower’s own

sources or by takeover by other bank/ HFI, concessions permitted shall

be recovered.

Documentation

Application form - Housing loan application form (NF 964) with

suitable modifications.

Loan agreement as per Annexure V of this circular. Mortgage by way

of Registered Mortgage (Annexure VI) equitable mortgage with

memorandum of deposit of title deeds.

Borrower(s) to execute a will (as per Annexure VII of the circular)

appointing the bank as Executor and Trusty which should be got

registered.

Photograph and PAN Number of all legal heirs to be obtained on the

application.

Succession Certificate.

The bank shall obtain legal opinion from the panel advocate for

ensuring clear title and marketability of the residence property, as per

procedure in vogue.

50

Documents should be handed over to the panel advocate by branch.

For this purpose circle should identify senior a experienced advocates

from the bank’s panel of advocates.

In case of pensioners, the pension account should be got transferred to

our bank.

To enable the bank to continue the periodical payments the borrower

has to submit the following documents every year.

- Property tax paid receipts.

- Life Certificate in the month of November.

- IT Clearance certificate.

Processing charges

0.25 % of the loan amount with a maximum of Rs.5000/

Inspection of the property

Pre sanctions Inspection & Inspection report as per extant guidelines

are applicable to the scheme.

Inspection of the property to be conduced once in six months to

ascertain whether any of the occurrences listed under

‘FORECLOSURE’ has taken place.

During regular Inspection of the branch, the Inspection Official has to

Inspect all the properties against which loan is granted under the

subject scheme.

Right of Rescission

After the documents have been executed & loan transaction finalized,

Senior Citizen Borrowers shall be given up three business days to

cancel the transaction i.e., the “right of rescission”.

51

If the loan amount has been disbursed, the entire loan amount will need

to be repaid by the borrower within this three days period without

interest.

Foreclosure

The loan shall be liable for foreclosure due to occurrence of the

following events of default.

If the borrower(s) has not stayed in the property for a continuous

period of one year

If the borrower fails to execute further documents as demanded by the

bank including acknowledgement of debt a security.

If the borrower(s) fails to pay property taxes or repair or maintain &

repair the property or fails to keep the home insured, the bank reserves

the right to insist on repayment of loan by bringing the residential

property to safe & utilizing the sale proceeds to meet the outstanding

balance of principal & interest.

If borrower(s) declares himself / herself /themselves bankrupt.

If borrower/s remarry.

If the residential property so mortgaged to the bank is donated or

abandoned by borrower (s)

If the borrower(s) effect change in the residential property that affect

the security of the loan for the lender.

For example : renting out part or all of the house; adding a new owner to the

houses title ; changing the houses zone classification or creating further

encumbrance on the property either by way taking out new debt against the

residential property or the interest by way of a gift or will.

-Due to perpetration of misrepresentation by the borrower(s).

52

- If the government under statutory provision ,seeks to acquiring the

residential property for public use .

-If the government acquires /condemns property (for example, health or

safety reason).

Counseling

The senior citizen borrowers need to counseled/ educated on the

various issues involve in the scheme.

Branches should clearly explain to the prospective borrowers the terms

& conditions of Reverse mortgage loan, The methodology followed for

valuation of the residential property, the method of determination of

eligible quantum of loan, the frequency of re-valuation & review of

terms & all related aspects of the Reverse mortgage loan.

Branch to counsel the borrower about the possible impact to the

borrowers due to adverse movements’ interest rates & property price

fluctuations.

Circle may identify Senior Citizens Associations& involve them in the

counseling.

All the costs to the Borrower(s) that are associated with the transaction

should be specified to the borrower(s).

The heads of branches selected to handle the proposals should be

adequately trained by the Circle to enable them to counsel the

applicant’s property.

Miscellaneous

KYC norms to be complied with as per extant guidelines.

The loan is to be classified under-Other Personal Loans-Non Priority.

53

The data pertaining to the scheme to be reported in PSR 71 as a

Separate scheme under Other Personal Loan Segment.

Conclusion

The budget estimates of 2007 reveals that the old age population in India will

increase to113 million by 2016 & 179 million by 2026. On an average, the life

expectancy is77 years, & this could increase to 82 years by 2020 owing to improved

heath care facilities & better nutrition. The increase in this segment of population

54

should not be ignored by the policy- maker as it represents a huge opportunities for

all schemes to senior citizen.

The retirement person’s percentage in the total population is estimated to be 8.9%

by 2016 & 13.3% by 2026. Considering the market requirement innovative

products/ services should be introduced by banks to the senior citizens.

BIBLIOGRAPHY

The Icfai University press

Professional Banker November 2008

55

Professional Banker February 2009

www.google.com

www.rbi.org.in

www.sbi.co.in

www.canarabank.com

56