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What are Compound Interest and Simple Interest, and How to calculate it?

We’ve all heard of compound interest and simple interest somewhere. Starting from school, everyone is taught about simple and compound interest. These two types of interests play a big role in an individual’s budgetary planning. So, let’s take a quick walk down memory lane and understand what exactly is simple and compound interest and how one can calculate them. [B-01] What is Simple Interest? Simple interest refers to the rate of interest that is charged on a loan for a given period. In simple interest, the principal amount remains the same. For instance, the interest rate may be 10% on loan of ₹20,000 for 6 months. Banks use simple interest to charge interest rates for loans. It is a quick and easy way of calculating the amount of interest that can be charged on a loan, i.e. the principal amount. It is usually applied for automobile loans or loans that are short-term. Some other loans may also use simple interest. Importance of Simple Interest Simple interest loans are helpful to the borrower in the following ways: a. Easy to calculate Simple interest is easy to calculate. It can be calculated only with the principal amount and the period for which it is taken, i.e. the loan tenure. b. Less amount of interest When taking a loan, it is best to get one on simple interest as the interest amount may be low. This is because no interest is charged on the interest, which is not the case with compound interest. c. No extra interest Simple interest is calculated with the principal amount and tenure of the loan. But, compound interest includes interest on interest. d. Good for loans In a loan with simple interest, the interest amount can be less if the principal amount is paid earlier than it has to be paid. How to Calculate Simple Interest? Simple interest is calculated using the following formula: Simple Interest = P × I × N where, P= Principal amount I= Daily interest rate N= Number of days between payments Simple interest is usually paid or received at a fixed percentage over the principal amount for a specific period. For example, assume an individual takes a simple interest loan on the principal amount of ₹18,000 for one year at a 6% annual rate of interest. The simple interest, in this case, will be as follows: Simple Interest = P x I x N = 18,000 x 0.06 x 3 = ₹3240 So, the total amount that needs to be paid by the individual would be: Total= Principal amount + Simple interest = 18,000 + 3240 = ₹21,240 What is Compound Interest? Compound interest is defined as “interest paid on interest”. Compound interest is sometimes also referred to as compounding interest. It is the interest that comes with a loan or a particular deposit. The interest earned and the principal amount are both used to calculate compound interest. Compound interest grows faster than simple interest. How fast this growth occurs depends on its frequency. In simpler words, the longer the period, the higher the compound interest. Why is Compound Interest Important? Compound interest is a quick and easy way to grow one’s wealth. The money that is invested is known as the principal amount. Compound Interest helps one earn returns on it. By the end of a specific period, one may have even doubled the previous amount invested. This is even more helpful for the youth that aims to grow their wealth in a small time. Reaching one’s goals becomes easier with compound interest. When one opens an account that bears interest and saves up enough money, they enjoy compound interest. With the help of compound interest, people have security. They can face factors such as high prices that may affect a country’s wealth. How to Calculate Compound Interest? Compound Interest can be calculated using the following formula: A = P (1 + [r / n]) ^ nt where, A = The amount of money after n years (this includes the interest) P = The principal amount deposited or borrowed r = The annual rate of interest (in decimals) n = The number of times the interest is compounded per year t = The number of years (time) the amount is deposited for Let’s look at an example. Assume that a person deposits ₹5,000 in their savings account, which pays a 5% interest for 10 years. So, A = P (1 + [r / n]) ^ nt A = 5,000 (1 + [.05 / 12]) ^ (12 * 10) A = 5,000 (1.00417) ^ (120) A = 5,000 (1.64767) A = 8,238.35 So, in 10 years, the individual would have ₹8,238 in their savings accounts. This means that along with the deposit of ₹5000, the individual has received interest of ₹3,238. Simple Interest vs Compound Interest Simple and compound interests are beneficial depending on the individual’s choices. Simple interest makes use of only the principal amount. Compound interest also uses the interest tenure along with the principal amount. Simple interest remains constant while compound interest grows over a while. So, it is beneficial for one’s loans and debts to be calculated with simple interest. But, investments and savings should be calculated using compound interest. [B-02] Final Thoughts By the end of this article, the reader will have gained a deeper understanding of compound and simple interests. When investing, it is best to opt for compound interest on one’s account. But, it is best to have simple interest rates when taking a loan. If used well, compound interest can help one generate wealth. In case of doubts, consult the financial experts at Piramal Finance. It will help you know their products and services, especially credit cards and personal loans.

08-11-2023

Banking

What is Net Banking, and What are its Types?

The internet has made everything around us very easy and convenient. We use it in our daily lives, and almost everything we do is somehow related to the internet. Net banking, which is also called e-banking or online banking, is a way to access many banking services through the internet. It eases the work of both the banks and the customers. It is vital for bank account holders to get hold of their bank accounts and control them as per their needs, and net banking has been aiding in doing it efficiently. Everything from money transfers to balance inquiries can now be done through the internet. You can apply for loans or invest in financial schemes on the net banking apps. All thanks to net banking, your banks are now just a tap away! In this article, we shall discuss net banking, its benefits, and the several types of internet banking available for bank account holders. [B-01] Features of Net Banking The several features of internet banking are discussed as follows: Safe & Secure: Net banking is way safer than manual banking. You can quickly transfer money from your account to another bank account without the burden of carrying the cash manually. It is secured with a personal net banking ID and password, which only you can access. Very Easy: Almost all banks have their mobile banking apps now. These apps have a very easy user interface that anyone can operate. No Restrictions: Net banking can be done at any time and anywhere. Unlike manual banking, where the banks shut around 5 pm and does not work on weekends, net banking is available 24×7. Various Facilities: All banking facilities, like NEFT, RTGS, IMPS, fixed deposits, recurring deposits, loans, EMIs, debit or credit card control, etc., can be done and managed through net banking. Card Login: Users can also access their net banking accounts by card login. You must enter your credit or debit card number in the login input and enter the OTP received on your mobile number. You are advised not to share your card number, CVV, or OTP with anyone to avoid banking fraud. How to Register for Net Banking? The banks provide net banking right after you open a bank account with them. Just in case your bank has not activated your net banking after your account opening, follow the steps given below to register: Fill out a net banking application form at your home bank branch. Also, provide the documents, like a passbook, an Aadhar card, etc., with the form to the bank authorities. The bank will issue you an ID and a password for net banking. Visit the official website of your bank and click on the net banking option. Input your ID and password, and access your account. Types of Net Banking The several types of net banking available for the users are as follows: National Electronic Fund Transfer (NEFT): This online banking system allows you to send money from one person to another. You can quickly transfer money from your bank account to any other bank account online by paying a small fee. All you need to have are the bank account details of the beneficiary. Real Time Gross Settlement (RTGS): In this online money transfer method, the funds are transferred from one bank account to another in “real time,” i.e., without any waiting period. It is a quicker fund transfer method than NEFT. Immediate Payment Services (IMPS): It is an instant inter-bank fund transfer method that can be done online and is available 24×7. You can even transfer money from your banking apps through IMPS. The Unified Payments Interface, or UPI, is based on the infrastructure of IMPS. Debit card or credit card: Thanks to credit and debit cards, we can all go cashless now. You can withdraw money using these cards from any ATM, anytime, anywhere. You can even use these cards to pay online by providing your card details. Electronic Clearing System: Through this online payment method, you can pay your electricity, phone, utility bills, etc., quickly without manually paying them. Advantages of Net Banking The several perks of net banking are discussed below: No time restrictions: You can access net banking anytime; it is available 24×7. Most banking services are available around the clock; you only need internet access, and your bank is just a tap away. Quick and easy: Net banking saves much of your time by quickly transferring funds. All other services are also very easily accessible, and you do not have to take time for them. Safe and Organised: Since net banking is secured with personal customer IDs and passwords, it is a safe way to carry out transactions. Also, the apps or interfaces you use for net banking are pretty organised and keep a record of all your transactions. You can check your transactions at any time. Eco-friendly: Net banking cuts a lot of paper usage. Since you can fill out all the forms online, use online passbooks, and carry out other banking processes which need paper, online you use the least paper, thus, helping nature. [B-02] Conclusion Through net banking, you can easily track your financial activities and manage them without any issues. It is a secure payment system for users and aids in avoiding cash loss and theft. However, it is dependent on a smooth internet facility. Thus, not all classes of people can have access to it. But still, this virtual way of banking is a huge benefit to the country’s banking sector and would help in the nation’s overall growth. Read more related blogs on the Piramal Finance website to explore our financial products and services, especially those on personal loans, credit cards, and financial calculators.

08-11-2023

Tax Slabs

What are Tax-Free Bonds?

Ever wondered about safe ways of investing money? Does the stock market scare you? Are you confused about the best way to invest without worrying about liquidity? Do you want a tax-free income from your investments? Do you want low-risk investments? Investing in Tax-free bonds might be the way to go! Let’s learn more about them. [B-01] How do tax-free bonds work? In simple words, tax-free bonds are government-issued bonds. Under Section 10 of the Income Tax Act, they are issued to collect funds for different causes. These bonds offer a fixed interest rate. They are similar to fixed deposits; you are offered a fixed, tax-free interest rate for a lump sum of money. Since the interest rate is set, it is a low-risk investment with guaranteed returns. Often, the breakdown of liquidity makes certain investments risky. You don’t have to worry about liquidity while investing in tax-free bonds. The best part of tax-free bonds is that there is no risk involved. In addition, it allows you to earn a regular annual income without interest rates. Tax-free bonds usually have a long-term maturity. Investing in these bonds can earn tax-free returns for up to 20 years. Also, tax-free bonds’ interest rate is much higher than other investments. You can also sell these bonds upon maturity. The National Stock Exchange enlists the price for these bonds. Types of Bonds: Where to invest? Government-issued tax-free bonds are one of the safest investment options. However, there are two types of such bonds – tax-free and tax-saving. Tax-Free Government Bonds: Such bonds have zero tax on interest income. You can invest up to INR 5 lakh. Tax-free bonds offer higher interest than tax-saving bonds. They come with maturity periods ranging from 10 to 20 years. Also, only Indian nationals and Unified Hindu families are allowed to invest in these bonds. Tax-Saving Bonds: These bonds provide an initial tax exemption under Section 80CCF of the Income Tax Act. You can avail of tax exemption against an investment of Rs 20,000 per financial year. These bonds have a buyback clause that allows investors to redeem investments after 5 or 7 years. So, tax-saving bonds are a good option if you want short-term investments. Tax-Free Bonds: Features and Benefits Tax-free bonds are favoured because of the following features: Liquidity: Tax-free bonds might be a good choice if you hesitate to invest because of liquidity. These bonds can be traded or sold according to the ongoing market price. However, you must pay taxes for any profit you earn by selling these bonds.Another selling point is that tax-free bonds are form-flexible. They can be held in physical or dematerialized bonds. Therefore, you can buy them directly or use your Demat account. Interest: The central government decides these bonds’ interest rates. You will receive the interest amount annually. Whatever amount is earned from interest is tax-free. Tenure: Tax-free bonds serve as long-term investments. Based on your interest, you can invest in these for up to 15 or 20 years. Tax exemption is not the only benefit of these bonds. Tax-free government bonds assure many other benefits, like: The government of India supports these bonds. Therefore they’re a very safe investment. You don’t have to worry about your money even if the company goes bankrupt. In such cases, company assets are liquidated, and investments are returned to bondholders. Apart from the principal amount returned on maturity, you can earn guaranteed interest from these bonds every year. There is no upper limit to investment in Tax-free government bonds. The higher the tax bracket, the more profit you can earn. Therefore, they are a great investment option if you fall in the 30% or above tax bracket. The price of these bonds is listed in the stock market. So, you can easily sell your bonds when their value appreciates. Furthermore, fixed deposits offer interest rates ranging from 4.5 to 5% in the short term. Tax-free bonds offer interest rates of up to 6%. How to invest in tax-free bonds? If you are interested in investing in tax-free bonds, you can buy these bonds when the government initiates a subscription. These bonds are available for very short durations. You can apply to the issuing company when the subscription for investment starts. You must submit KYC and PAN details online and offline to receive these bonds. Currently, there are no tax-free government bonds available in the primary market. But previously issued bonds can be bought on the stock exchange. You can buy or trade these bonds like equities in the secondary market through your Demat accounts. NABARD, HUDCO, NHAI, PFC, REC and IFC are popular bonds among investors. How to redeem tax-free bonds? You can redeem your investment upon maturity once the bond’s tenure is completed. Since tax-free bonds are considered long-term investments with tenures of 10-20 years, they cannot be redeemed before maturity. However, if you do not wish to hold these bonds any longer, you can trade them in the stock market. Moreover, the proceedings are credited to your bank account if you sell these bonds in exchange. If you sell your bonds within a year of purchase, you are liable to pay taxes. However, if you retain the bonds for more than a year, tax payment on returns is 10% without indexation. [B-02] Conclusion If you qualify for the higher tax brackets or wish to make long-term investments, tax-free government bonds are ideal. These bonds offer a good maturity period and greater interest rates than fixed deposits. They are also very safe investments since the government backs them. You can hold these bonds long-term or trade them like equity in the secondary market. Since the government determines these bonds’ prices, you don’t have to worry about market fluctuations. Furthermore, you can earn guaranteed interest returns annually. A financial expert like Piramal Finance offers you accurate and authentic information on personal loans, tax-free bonds and other investment options. We also offer consultancy services. Visit now!

08-11-2023

Complete Guide on How to Calculate FD Interest

A fixed deposit is an investment option that is risk-free, simple, and needs only a single initial payment. You can leave a sum of money known at the bank for a fixed time. During this time, interest will be accrued on the deposit. After it all, your initial deposit will be returned to you, along with interest. Do you have questions about how much interest you’ll be getting on your fixed deposit? You will be able to learn how to compute FD interest using an FD interest calculator by reading this article. Understanding how interest on FDs is calculated might help you make the most of your investment. Even though many people find calculations very difficult, we are here to make things as easy as possible. [B-01] How is FD Interest Calculated? Fixed deposit interest calculators use two separate formulas to compute interest on FDs. Why two? This is due to two fixed deposit accounts: simple interest and compound interest. The formulas used to compute the fixed deposit manually are presented below. Simple Interest Formula SI = PRT/100 In the formula, ‘SI’ stands for Simple Interest. ‘P’ stands for the principal amount, which is the amount of money that you put into the FD. ‘R’ refers to the rate of interest that is accrued on the principal. And ‘T’ refers to the length of time that the principal is locked in. Let us consider one example: Calculate the amount of simple interest that a person can receive on Rs. 8,200 over a 2-year, 6-month period at a rate of 17.5% p.a. S.I. = (8200 x2.5x 17.5)/100 = Rs. 3587.50 Compound Interest Formula CI = A – P In the equation you just looked at, the letters ‘CI’ stand for compound interest. The value denoted by ‘P’ is the principal amount. And ‘A’ is the amount that will have been accrued when the loan is paid off. The value of ‘A’ can be derived by using the formula that is given below: A=P (1+r/n) ^ (n*t) In this formula, ‘A’ is the maturity amount. ‘P’ is the Principal amount,’r’ is the rate of interest, ‘t’ is the time, and ‘n’ is the compound interest frequency. What is an FD Calculator? The maturity amount that the investor should get after the tenure of the FD at the applicable interest rate can be obtained using a fixed deposit calculator. Before investing money in an FD, you can calculate the interest income using an FD calculator. Why Use an Online FD Interest Calculator? To know about the interest you will get when your fixed deposit matures, you can now easily use an online fixed deposit interest calculator. ● The calculations always give accurate results: Because it is an entirely automated process, there is no room for human error, making the results accurate. ● Helps you to know the risks: If you calculate the interest you will get on the maturity of the FD, you will have an idea of what returns you may get on your fixed money. This will also help you to know more about the risks so that you can choose whether the risk with the FD is worth the potential return. ● You will save both time and effort: If you use an online FD interest calculator rather than making the calculations yourself, it goes without saying that this option is considerably simpler and more efficient. In addition to the fact that the results will be displayed in a couple of minutes, the amount of effort necessary for it is also very low. How Does an FD Calculator Work? Below are the steps to use the fixed deposit calculator: Step 1: Collect all the information about the fixed deposit, such as the principal amount to be invested, the tenure you want to fix your money, and the interest rate that the bank provides. Step 2: Launch the FD calculator and insert the variables into the boxes on the interface. Step 3: The FD interest calculator will quickly show you how much money you will get back when your fixed deposit account matures. Benefits of using the FD Calculator ● An easy and smart approach to budgeting ● It allows you a repeated use to compare the results of investments ● You have to pay no fee for using the FD calculator. ● It also gives you a schedule for the payment of interest on a very consistent basis. [B-02] Conclusion Returns on a fixed deposit are certain. The interest rate offered by the bank when you open an FD will not change till the maturity of your FD. It does not matter whether the interest rates rise or fall; your FD will remain unaffected. Using an FD calculator, you may see the returns you will get after a given amount of time. With the help of Piramal Finance’s user-friendly FD interest calculator, you can quickly choose whether or not a fixed deposit will result in a profit for you in the long run. If you need help with finances, you can always take the help of experts such as Piramal Finance to guide you through your personal finance woes.

08-11-2023

Other

Everything you need to know about a cancelled cheque

A cheque is a financial instrument used by banks. It instructs the bank to pay the amount stated on the paper from the drawer’s account. But digital transactions are becoming mainstream. You can now handle tasks like money transfers and withdrawals online. A cancelled cheque is a validation that you have an account with that specific bank. The document can be necessary when applying for loans, investing in mutual funds, or buying high-end products on EMI. The article will examine a cancelled cheque, its purpose, and how to write one. [B-01] What is a cancelled cheque? A cheque with two parallel lines across its body with the word ‘cancelled’ between those lines is a cancelled cheque. You don’t have to write anything or sign this type of cheque. Every leaf in your chequebook has details like: Bank name Branch details Account number IFSC code MICR code Cheque number If any financial institution, employer, or business wants to verify your bank details, they can ask to see a cancelled cheque. But, giving out a blank cheque is not a wise decision. This is because there are chances of cheque misuse. So, how do you safely share your banking information? Cancelling your cheque is the answer to this question. Once a cheque has “cancelled” written on it with two parallel lines on either side of the word, no one can use it for any other purpose. But the details available on the cheque are valid. So, any third party can use the same cheque to carry on with their verification process. Why do you need a cancelled cheque? The primary purpose of a cancelled cheque is to verify if you have an account with that particular bank. One can use it to check details like account numbers and IFSC codes. There can be several instances where a third party might ask for such a cheque. Let us look at them in detail below. Know Your Customer (KYC) KYC is a mandatory verification process to be carried out by financial institutions. The aim is to verify a customer’s identity. It also aims to prevent illegal activities like financial fraud, identity theft and money laundering. The Reserve Bank of India has made KYC necessary for individuals wanting to take part in financial transactions. Examples include opening a bank account or trading stocks. A cancelled cheque can help verify your details, establish your customer identity, and complete the KYC process. Open a Demat Account If you want to invest in mutual funds, trade stocks, or buy bonds, you first need a Demat account. The account holds your securities, like stocks, in an electronic format. The benefit of owning a Demat account is that it handles the risks of paper-based certificates. You can lose these certificates; they can be stolen or tampered with. The account helps to store your shares and funds in one place securely. It also makes the transfer a seamless process. So under the KYC guidelines, a cancelled cheque is required to verify your details before opening a Demat account. Equated Monthly Installments (EMI) EMI is a type of payment method. You will make regular payments to the lender to repay a loan within a specific time frame. For example, you can make EMI payments to buy a high-value product, make credit card bill payments, or repay a personal, education, or home loan. As the company lets you have a high-value product or the financial institution is lending you a big amount, they need to verify your details. And again, a cancelled cheque is one of the documents the company and bank can use for verification. Electronic Clearance Service (ECS) An ECS facilitates electronic money transfers from one bank account to another. Organisations or individuals can use ECS. In the case of organisations, ECS can be used to pay salaries, pensions, or dividends. For individuals, ECS can be used to make bill payments, EMIs, or periodic SIP investments. When you use your bank account for ECS, the set amount will be debited from your account periodically. So, to set up this process, the bank will need a cancelled cheque from you. Employee Provident Fund (EPF) Withdrawal EPF is a scheme where one accumulates retirement benefits. The Employees’ Provident Fund Organization (EPFO) offers this scheme. You can withdraw money from EPF once you reach retirement age. Or it could be for other reasons like home loans, job loss, marriage, and investment in Varishta Bima Yojna, among others. EPF withdrawal has become hassle-free as the process is now available online. When raising a withdrawal request, you must upload a cancelled cheque with your name printed. The cheque is used for verification as the money will be transferred to that particular account. Insurance Policies There are various types of insurance policies available in India. For example, you can buy life, health, car, or property insurance. Depending on the policy terms and provider, you could make a one-time payment or opt for a monthly, quarterly, or annual premium payment. For these periodic payments, you need to provide bank details. So, the provider might ask for a cancelled cheque to verify the account details from which you will make payments. How to write a cancelled cheque? Now that you know the reason behind cancelling a cheque, let us look at the right way to cancel a cheque. Take a fresh cheque leaf from the chequebook. Draw two parallel lines across the layout of the cheque. In the space between the two lines, write “CANCELLED” in capital letters. Make sure you do not draw or write over details like account numbers, branch addresses, or IFSC codes. There’s no need to sign the cheque or write anything extra on it. [B-02] Conclusion To summarise, a cheque with two parallel lines on its body with ‘cancelled’ written between the lines is a cancelled cheque. The purpose of such a cheque is to verify if you have an account with that particular bank. It also verifies the bank name, branch address, account number, IFSC code, and MICR code. You will have to provide a cancelled cheque if you want to invest in mutual funds and stocks or buy insurance policies. Other applications include opening a bank account, withdrawing money from EPF, or opting for EMI or ECS. The most important use of a cancelled cheque is the secure sharing of bank details with third parties. If you are looking for a personal loan or a home loan, you can connect with the experts at Piramal Finance to learn more.

08-11-2023

Everything You Need to Know About Post Office FD Calculator

Not sure what is FD Calculator? Use a fixed deposit calculator to see the potential interest rate you can earn from a fixed deposit. With the help of the Post Office FD Calculator tool, you can quickly get to know the interest rates on India Post Office Fixed Deposits. This article will explain a Post Office FD Calculator and how to get the most out of it. [B-01] What is Post Office Fixed Deposit (FD)? The Indian Postal Services are the oldest and most popular investment option is the Post Office Fixed Deposit or a Post Office Time Deposit. Due to the help of the Indian government, they are seen as a secure way to invest money. As a result, it is a well-known investment option for earlier generations. Like a bank deposit, a post office fixed deposit allows the funds to be deposited by the investors for a fixed time and at a fixed interest rate. The interest rate offered rises with the length of the investment. An investor can receive a fixed return on their investment. TDS is applied to the interest that the post office pays. Although it is calculated quarterly, the interest is due annually. Under section 80C of the Income Tax Act, a 5-year post office FD is eligible for tax savings. A minimum of INR 200 must be invested, followed by multiples of INR 200. A post office FD may be transferred between post offices. There is a six-month withdrawal restriction on post office FDs. After that, early withdrawal is possible with a 1% penalty. The Post Office FD is a good choice for highly cautious investors who want to make a one-time investment. Interest Rate for Post Office FDs At the start of each quarter, the government fixes the rates. The ones mentioned in the table have been set for the April 2022–June 2022 quarter. The Post office FD calculator is calculated on this interest rate: TenureInterest Rate (per annum) 1 year5.50% Two years5.50%Three years5.50%Five years6.70% What advantages does using the post office FD calculator offer? Among the main perks of using an FD calculator are: The use of this tool is quite simple. It compares various post office FD investment factors for giving a final output. Estimating the amount of money you can get at maturity and the interest rate is also very easy. You can use this FD calculator free of cost several times to calculate returns. The calculator should complete the FD calculations in a matter of seconds. Investors benefit from the time and effort savings. Why should I buy a post office FD? Here are some of the main features and advantages of a Post Office FD investment that justify why investors ought to think about doing so: 1. Facility for nomination Investors can add nominees to their accounts when they open their Post Office FD investment accounts. If the original investor dies, the legal heir can claim the fixed money. 2. Cheapest investment A minimum deposit of Rs. 1,000 is needed to open a Post Office fixed deposit account, and there is no upper limit. The program also allows up to three adults to open a joint account. 3. Favourable interest rates Post office FDs offer more interest rates compared to bank FDs. Senior citizens can also benefit the most from this as they can get better rates. 4. Taxation Investors who buy a 5-year Post Office FD can also get many tax benefits under Section 80C of the Income Tax Act, 1961. On the maturity amount received from a Post Office FD, TDS is applied. 5. Simple renewal At maturity, the investor can quickly renew a post office FD investment. One must either fill out a form or choose the auto-renewal option. 6. Premature withdrawal An investor can not remove a post office FD investment for six months after the investment date. If an FD is closed within six months to one year after the investment date, the investor only receives the interest rate on a savings account. A 2% penalty is added to the interest earned if the account is closed before the year is out. Use of the Post Office FD Calculator Has Many Benefits Using the online post office FD calculator has the following benefits: You can avoid manually doing the calculations that need a complex formula by using the post office FD calculator. The calculator applies the calculation and displays the outcomes right away. The FD calculator provides precise numbers. This removes the issue of mathematical errors, which can occur when you do manual computations. You can use the post office FD calculator to plan your investments since the returns from post office FDs are guaranteed. Different interest rates are available on various investment terms in post office FDs. You can quickly enter the necessary numbers in the calculator to obtain the desired results. This allows you to plan and maximise the rewards of your investment. The post office FD calculator inputs can be changed as often as you like. This allows you to compare various choices to select the best investment. You can not take money out of your fixed deposit before it matures; thus, using the post office FD calculator is also essential. If you do, you might have to give up a vast portion of the interest you had been earning. As a result, you are advised to do a deep analysis before investing in any fixed deposit scheme. You can do this using the FD calculator at the post office. [B-02] Final Thoughts Due to the control of the Government on these schemes and the resulting security, many investors in India prefer to invest in Post Office fixed deposits. The Post Office FD calculator may be the best option for investors who wish to invest in a risk-free environment and demand assured profits. Interested in reading more investment-related blogs and posts on personal loans and financial calculators? Head on over to Piramal Finance!

08-11-2023

Banking

6 Major Differences Between Bank Rate and Repo Rate

Bank rates and repo rates are both short-term tools for regulating the flow of money in the market. Their functions are similar in limiting inflation and liquidity and aiding in balance inquiry. We must discuss bank rate vs repo rate in detail to know about both concepts in a better way. Let us get a handle on their meaning before diving into the contrast. The Reserve Bank of India keeps an eye on the repo and bank rates. [B-01] Defining Repo Rate In times of economic distress, the Reserve Bank of India (RBI) loans money to commercial banks at an interest rate known as the repo rate. The repo rate controls the rate at which banks can borrow funds. If the Reserve Bank of India (RBI) needs to boost the liquidity rate, it can do so by lowering the repo rate and urging the banks to unload their securities. Both policymakers and central banks use interest rates to influence the economy. A repo rate is a monetary policy tool the central bank uses to manage the amount of money in circulation, inflation, and market liquidity. When the Central Bank has to pump funds into the economy, it lowers the repo rate, making investment borrowing easier. It boosts economic growth by raising the money supply. Defining Bank Rate The bank rate, also called the discount factor, is the interest rate the central bank charges commercial banks when they borrow money. Bank rates influence the rate of central banks’ borrowed money. When interest rates are lowered, the economy benefits. As a result, the cost of borrowing money drops, which can encourage borrowers to take out more loans, increasing overall spending. If policymakers believe inflation will rise, they will likely hike the bank rate. It is used to decide economic and monetary policy. The RBI raised the repo rate by 50 basis points, from 4.40% to 4.90%, on June 8, 2022. The current interest rate at the bank is 5.15%, a 50 basis point (bp) increase from the prior rate of 4.65%. Repo Rate vs Bank Rate—Key Differences The repo rate and bank rate are both set by the central bank and used to keep tabs on direct market liquidity. But there are important distinctions between the two, which we have discussed in detail below. The interest rate the central bank charges for investing the money back from financial institutions is the repo rate, and the interest rate the central bank charges for lending money to these banks is the bank rate. In contrast to charging the bank rate, charging the repo rate involves using assets, leases, agreements, and collateral. Compared to the bank rate, the repo rate is relatively fixed and sure to be constantly lower. Since fewer people will take out loans at the higher bank rate, the economy will feel the effects. In contrast, the repo rate is handled by banks and has no direct effect on clients. The bank rate serves the long-term funding needs of commercial banks, but the repo rate meets their more immediate liquidity needs. Let us examine these six major comparative points regarding bank rates vs repo rates in brief: 1. Added loan fee: The bank rate is the interest rate that a central bank charges for a loan that it makes to a commercial bank; in contrast, the repo rate is the interest rate that a commercial bank charges to purchase securities that a commercial bank has previously sold to a central bank. 2. Aim: Long-term objectives can be met with bank rates, whereas intermediate objectives can be met with repo rates. 3. Repurchase Agreement: Money borrowed from the Central Bank at the bank rate is not subject to any arrangement. The loan is made to the commercial bank at a set interest rate. However, in the case of the repo rate, banks enter into a repurchase arrangement. As part of this deal, the bank has promised to repay the loan at a specific interest rate. 4. Use of Collateral: No collateral is needed while negotiating bank interest rates. With repo rates, on the other hand, the loan is approved only after the collateral is presented. 5. Rate: Almost always, the bank rate is greater than the repo rate. 6. Effect of Rate Changes: When the bank rate is raised or lowered, the economy and consumers are directly affected. For example, if bank rates rise, loans will cost more as the interest rate rises. This restricts credit and impedes economic expansion. Rates that are lowered result in lower interest rates and more affordable loans. As a result, lending and borrowing increase, boosting the economy. The economy is not affected in this way by reverse repo. [B-02] Conclusion We hope the six key differences regarding bank rate vs repo rate are clarified. The country’s Central Bank is the highest authority on monetary policy and is responsible for setting and regulating bank and repo rates. These rates control the money supply, inflation, and bank lending rates. Reducing the repo rate and the bank rate allows borrowers to avail themselves of loans at lower interest rates. An increase in repo rates, therefore, will have a corresponding increase in the interest rates on loans. Are you looking for similar finance blogs? Visit the Piramal Finance website and help yourself to the knowledge of wide-ranging financial products and services, especially credit cards and personal loans. Are you looking for similar finance blogs? Visit the Piramal Finance website and help yourself to the knowledge of wide-ranging financial products and services, especially credit cards and personal loans.

08-11-2023

Other

Cancelled Cheque: Everything You Need To Know

Although more people are banking online, you may sometimes need a cancelled cheque. This is a physical document with your bank account information on it. It can verify your information or prove that you have a valid bank account. Cancelled cheques are often required when opening a new bank account or applying for a loan. Banks can crosscheck your account information when you provide a cancelled check. Even if you’re looking to buy something on a monthly payment or EMI, you will need this type of cheque. Read on if you’re wondering how to write this cheque or its purpose. We’ll tell you everything about cancelled cheques. [B-01] What is a cancelled cheque? A cancelled cheque is a regular cheque with the words like ‘cancelled’ or ‘void’ written across it. The cheque may have your account number, branch number, and your bank’s name. It also has a watermark and unique security features to prevent it from being copied or altered. This way, you don’t need to worry when sending your cheque to an institution or individual. When do you need to cancel a cheque? You have to submit a cancelled cheque when opening a new bank account. Also, it is required when applying for a loan or setting up EMI payments. A cancelled cheque makes it easy for the recipient to verify your identity. It ensures that the account is active. Here are some cases where you’ll need to submit a cancelled cheque: KYC Documentation You have to submit a cancelled cheque when updating your KYC details. This is to ensure that the bank has your latest account information. When investing in mutual funds, you may be asked to submit an image of a cancelled cheque beforehand. Direct Deposit You must submit it to set up a direct deposit for your paycheck or any recurring payment. The employer or the organisation making the deposit can verify your account information and pay the amount safely and securely. Your employer will record your bank account information on file once the direct deposit is set up. As a result, you’d only need to provide more details if you moved banks or established a new account. Automatic Bill Payments Besides, bill payments or monthly expenses are also processed through a cancelled cheque. You will need to provide your bank with a cancellation cheque for these expenses. They may ask for a cancelled cheque to verify your account information. Opening a Demat Account When opening a Demat account, you need to reach out to a stockbroker. Your stockbroker will need your bank account details and a cancelled cheque. This is to verify your identity and ensure the account is active. These details will make your transactions easy and comfortable. Payroll Deductions Suppose you have any deductions from your paycheques, such as for health insurance or a retirement savings plan. In that case, you will need to provide your bank account information to the organisation making the deduction. They will likely ask for a cancelled cheque so that they can verify your account information. When you give someone a cancelled cheque, they can use it to do a transaction for you. So make sure you trust the person or organisation before giving them a cancelled cheque. How to write a cancelled cheque? Writing a cancelled cheque is straightforward. It is similar to writing a regular cheque, with a few extra steps. Follow these instructions: Step 1 Take a fresh cheque Step 2 Do not add any personal details like your name or signature to this cheque. Step 3 Draw two parallel lines where you can write “Cancelled” using block letters. Draw these lines diagonally across the cheque. Be careful while writing a cheque. Don’t draw the lines or write over the MICR code, branch address, account holder’s name, account number, etc. If you’re sending the cancelled cheque by mail, you should use registered mail. This way, you’ll have proof that it was delivered. You may also want to keep a copy of the cheque for your records. FAQs: If you need to know more, here are some common questions people ask about cancelled cheques: Can I provide a photocopy of a cancelled cheque? In some cases, a photocopy may be accepted. However, it’s always best to check with the payee to see if they require the original cheque or if a photocopy will work. Do I need to sign before cancelling a cheque? It is advisable not to sign a cheque you’re about to cancel. It may give the person in possession of the cheque the ability to alter the payee’s name and the amount and cash it. Can I withdraw money using a cancelled cheque? No, a cancelled check cannot be used to withdraw money from your bank. What information on a cancelled cheque can be used by the receiver? The account number and the bank’s details are the only information extracted from a cancelled cheque. The account holder’s name, the date, and the amount of the cheque cannot be determined from a cancelled cheque. What should I do with old cancelled cheques? You can shred them or keep them in a safe place. If you need to provide a cancelled cheque at some point, you can always make a new one. [B-02] Conclusion A cancelled cheque is a sign of authorisation that can be used to set up transactions on your behalf. Only provide this cheque to people or organisations you trust. When in doubt, ask the payee if they will accept a photocopy of the cheque instead. Lastly, ensure you understand how to write and cancel a cheque before doing so. At Piramal Finance, we are here to guide you through the process. Contact our representatives if you need help writing or sending a cancelled cheque to get a loan. For other facts about personal loans, credit cards and financial management, check out more blogs on our website!

08-11-2023

Other

All You Need to Know About Account Balance Check?

You’ve just been paid, and you’re eager to see how much money you have in your account. So, you log in to your bank’s website and type in your username and password. Then you click on the “Accounts” tab and select your account. Finally, you click on “Account Balance Check.“ However, instead of getting the expected result, you get a message that says, “We’re sorry, we’re experiencing technical difficulties. Please try again later.” Don’t worry. This happens to the best of us. In this article, we’ll walk you through checking your account balance step-by-step. But let’s know about the basics first. [B-01] Why is it important to check your account balance? You may be wondering why conducting balance enquiry regularly is essential. Well, there are a few reasons. First, ensure you’re not spending more money than you have in your account. This can lead to some nasty overdraft fees, which no one wants to deal with. Another reason why it’s important to keep track of your account balance is to make sure that all of your transactions have been properly processed. Sometimes, mistakes can happen, and by checking your account balance regularly, you can catch these mistakes before they cause any damage. When and how should you check your account balance? You should do your account balance check at least once a week. This way, you’ll always be on top of your finances, and you’ll be able to spot any suspicious activity right away. If you’re not sure how to check your account balance, don’t worry. Here are the steps involved in this process: Step 1: Log in to your online banking account. Step 2: Look for the “Accounts” tab and select “Account overview.” This will give you a detailed breakdown of all your accounts, including the current balance. Step 3: If you want to get even more specific, you can also view transactions from the past few months. This will give you a good idea of where your money is going and how much you’ve been spending. What Is the Best Way to Check Your Account Balance? There are a few different ways to check your account balance, and the one you choose will depend on your personal preferences. Here are the most common methods: Online Banking Online banking is the most popular way to make an account balance enquiry, as it’s quick and easy. All you need is a computer, tablet, or any other mobile device with your bank’s app and an internet connection. To get started, here’s what you need to do: Step 1: Open your bank’s official website and enter your login details and password. If logging in via a mobile device, open the bank’s app with your MPIN or login password to get started. Step 2: If you are using this method for the first time, you may also have to register as a first-time user and generate an MPIN or create a password. Step 3: To register, enter your account number, email address registered with the bank, mobile number, and debit card number issued by the bank with its CVV given on the back. Step 4: The app or website will generate an OTP and send it to your registered mobile number. Step 5: Enter this OTP with your username and password to see the account details. If you are an existing user, follow the steps already explained above. ATM You can also check your account balance with your ATM card. Just be sure to have your bank card and PIN handy. The steps involved in this process are: Step 1: Once at the ATM, enter your card in the slot and feed in your PIN (a four-digit code). Step 2: Choose the balance enquiry option on the screen. The machine will tell you your account balance immediately. Step 3: You may also obtain a printed receipt from the machine by choosing the right option. Some banks may charge an additional fee for using the ATM of a different bank. Ask your bank about these charges before you start using your card at the machine. Text Messages If you need a convenient method for account balance enquiry, you may get them through SMS alerts. All you have to do is select SMS alerts when opening your account. This way, you will automatically get account balance updates for every transaction you make. It does not even require a password or username to use this option. If you did not select SMS alerts when filling out the form, you may still visit your bank branch and fill out a separate form to activate this feature. Telephone Calling If none of the above methods appeals to you, you can take the traditional route and call your bank to know the balance. There must be a bank call centre number that will automatically tell you the amount in your account. Since the systems are automated now, you have to enter your account number to get details on your registered mobile number. UPI and Other Apps UPI and banking apps have become imperative for digital payments and transactions, especially if you have more than one bank account. With a single UPI app, you can manage them if the registered mobile number is common for all accounts. For an account balance check on UPI, you need to: Step 1: Activate your app and set a PIN. Step 2: When you open the app, choose the “check account balance” option. Step 3: Enter your UPI PIN, and the balance will be displayed on the screen automatically. Missed Call Almost all the banks in India offer the facility of balance enquiry through a missed call. In this service, when you make a missed call with your registered mobile number, the bank will send your balance update via a text message. You need to keep your number active and your bank’s phone number handy to avail of this facility. [B-02] In conclusion Lastly, you can follow the time-tested methods and visit your bank branch to get your passbook updated for an account balance check. The passbook has all the information, including your transactions, so it’s best to keep it up to date so you can keep track of your finances. If you need help with any of these processes, do not hesitate to seek expert help. The financial advisors at Piramal Finance are always available, just one call away, to answer any query or clear any doubts about account balance enquiry methods. If you need help with finances, you can always take the help of a financial expert like Piramal Finance. They will suggest what’s best for you and help take care of your personal loan requirements, if any.

08-11-2023