Use credit cards elegantly

A characteristic free credit period in India is 45-51 days. If you pay off the dues within this period, the interest is saved. If in case you are unable to pay off the entire amount within the due date, a common practice is rolling over the dues after paying the minimum amount. This could be expensive as you would have to pay an interest of about 3 % per month and the new purchases made will not get any interest-free period until the dues are completely settled. So, here’s a quick look over the other schemes offered by card companies to clear off credit card bills.
Balance transfer
If you opt for Balance Transfer, you can transfer the outstanding balance from one card to another, and thereby extend the repayment period.
Process
A balance transfer can take place between any two banks. The process takes 7-10 working days with a processing fee, and a maximum of 2 % will be levied.
Low interest rates or sometimes zero interest rates are available for balance transfers.
Points to be taken care of
Check for hidden charges or if the bank charges a transfer fee in addition to the processing fee.
The low interest rates the banks offer on balance transfers may be for an introductory period and once this period is over, it may return to the normal rates.
It is important to note that the credit limit of the card on which your new due is, will be reduced proportionately. Also remember that the balance transfer amount will be limited to a maximum 80 % of your credit limit.
EMIs on credit card loans
If you are having a problem in paying the entire credit card bill at one go, a good option is to convert it into EMIs. This facility is similar to a personal loan. But here, unlike personal loan there is no paper work and no waiting for approvals either.
Another advantage here is that you need to pay a lower interest rate of about 1.5 to 2 % whereas the normal credit card rollover interest rate is higher than 3 %. Also, while this scheme is running, one still gets the interest-free period on new purchases.

Basix gets 100 crore loan on personal guarantees of directors

In a first of its kind loan transaction in the troubled microfinance segment, public sector Central Bank of India has sanctioned a `100 crore loan to Bhartiya Samruddhi Finance Ltd (BSFL), the flagship company of the Basix group, against personal guarantees of its directors, including group chairman Vijay Mahajan.
According to Basix’s website, it has nine other directors on its board. The loan is yet to be disbursed.
Mahajan, 56, who is also the president of micro-lending industry body, microfinance institutions network (Mfin), and is currently undertaking a Shodh Yatra, a nationwide tour to “extended grassroots enquiry into the lives and livelihoods of poor people”, confirmed the development but said it may not necessary for Basix to avail of the loan as a bank consortium, led by Small Industries Development Bank of India (Sidbi), is looking into a `650 crore recast of the firm’s debt.
“The bank has sanctioned the loan for Basix. We are exploring the possibility of obtaining personal guarantees from MFIs against loans,” a Central Bank of India official said. He declined to be named as he is not authorized to talk to media.
BSFL is the fifth largest MFI in India, with around two million borrowers in Andhra Pradesh, Maharashtra and Orissa. It has a total personal loan outstanding of around `1,800 crore.
This is the first such loan that an Indian bank is extending to any microfinancier in the country after the industry plunged into an operational crisis in mid-October, when Andhra Pradesh, the fifth largest state in India accounting for at least one-fourth of country’s micro-lending industry, enacted a law to put an end to alleged coercive methods resorted to by some micro-lenders to recover loan dues from poor borrowers.
Officials of micro-lending industry said if banks insist for personal guarantees or any other sort of high collateral requirements, it would be extremely difficult for small MFIs to secure adequate bank finance to run their operations.
“No bank has entertained our requests for fresh loan ever since the crisis happened. What can I do if they seek guarantees worth `10-50 crore when my net worth will be far less than that?” asked the head of a Hyderabad-based MFI, who did not want to be named.
The budget for 2012 has proposed to create a `100 crore equity fund with Sidbi to help smaller MFIs survive when banks are not forthcoming to offer them loans. Indian banks, including Sidbi, have lent around `14,000 crore to microfinance institutions as on 31 March 2010, according to data from National Bank for Agriculture and Rural Development.
But since October, fresh lending has happened to few companies that have operations outside Andhra Pradesh.
The Andhra Pradesh law banned micro-lenders from giving a second loan to a borrower without prior government approval and made monthly collection mandatory for such firms instead of weekly or daily collections. This resulted in a sharp fall in the collection of loan instalments from borrowers, promoted banks to stay away from lending fresh loans to MFIs and forced micro-lenders not to give any new loans to their borrowers.
The Reserve Bank of India and (RBI) finance ministry stepped in to resolve the issues in the sector that is vital for financial inclusion of rural poor.
An RBI committee, chaired by Y.H. Malegam, had recently proposed a cap of 24% for MFIs and a margin cap of 10% for large ones, besides making it compulsory that not more than two MFIs can lend to the same individual.
RBI also asked banks to continue holding on operations to the sector by recycling loans to MFIs to the extent of recovery and resume lending, with a view to assist the ailing industry tide over the current crisis phase. But there are not many takers for the regulator’s call.
Perturbed by the regulatory uncertainty in the sector, some banks are now demanding higher credit enhancements in the form of cash collateral, personal guarantees and other securities such as land assets from MFIs for new loans and even to buy securitized portfolios.