Private banks cautious on lending to students

Q: I want my son to apply for an education loan from a bank in India. I am told that private banks in India have stopped giving these loans because they have a large number of non-recoverable amounts in respect of loans given earlier.
A: It is true that banks are having a huge portfolio of non-performing assets pertaining to educational loans. Hence, private banks have become very cautious while entertaining such applications and require security to be provided. However, public sector banks still give educational loans and 90 per cent of the market share of such loans is with them.
A few non-banking finance companies also give educational loans. The average ticket size has increased from Rs325,000 to Rs680,000. Therefore, your son will be able to secure an educational loan. The application will have a good chance of success if some security can be provided. A secured loan will generally be given at a lower rate of interest.
Q: My mother has some funds in India and she wants to invest it in gold. However, I have been advised that the gold bonds scheme is a better avenue for investment as a reasonable return is available every year apart from the benefit of appreciation. I want to know the permissible limits for such investments.
A: Earlier, subscription to Sovereign Gold Bonds was upto 500 grams every year. This has been increased to four kilograms. For trusts and similar entities, the maximum investment in gold bonds is restricted to 20 kilos as against 500 grams earlier. The government is also going to announce appropriate market-making initiatives in order to improve liquidity and enhance credibility of gold bonds.
While the maximum limit for individuals is now four kilos, the minimum limit is as low as one gram. The gold bond scheme offers a 2.5 per cent per annum rate of interest which is payable half yearly on the nominal value of the investment. This interest is taxable, but capital gain made on redemption of the gold bonds is free of tax.
Q: I am planning to return to India, having reached the age of 65. Since I will be relying on income from investments, I want to know whether there are any products which provide a reasonable rate of return.
A: There are a couple of schemes where a reasonably good rate of interest is guaranteed for a certain period of time. These schemes are available to resident Indians and since you are returning to India for good, you will be eligible for the same. Under the Senior Citizens' Savings Scheme, interest is payable at the rate of 8.4 per cent per annum. This scheme has a tenure of five years. The maximum amount which can be invested in this scheme is Rs1.5 million.
Another scheme which has been launched recently is the 'Pradhan Mantri Vaya Vandana Yojana'. Under this scheme, the monthly rate of interest is eight per cent which works out to 8.3 per cent annually. This scheme has a tenure of 10 years. The maximum amount which can be invested in this scheme is Rs750,000. In case of both the schemes, the interest is taxable. However, senior citizens who are more than 60 years of age are eligible for an initial exemption of Rs300,000.
The writer is a practising lawyer specialising in tax and exchange management laws of India. Views expressed are his own and do not reflect the newspaper's policies.