10 years. Premature withdrawal is allowed but with a penalty. 4. RECURRING DEPOSIT (RD) — You deposit a fixed amount every month for a fixed period. Good for salaried people.
Interest is similar to FD. 5. FCNR (B) ACCOUNT — Foreign Currency Non-Resident (Banks) account. Opened by NRIs. Deposits are in foreign currency.
No exchange rate risk for depositor. 6. NRE ACCOUNT — Non-Resident External account. Opened by NRIs. Deposits in Indian Rupees.
Fully repatriable (money can be sent back abroad). Interest is tax-free in India. 7. NRO ACCOUNT — Non-Resident Ordinary account. For income earned in India (rent, pension).
Partially repatriable. Interest is taxable
Deposits up to Rs. 5 lakh per depositor per bank are insured by DICGC (Deposit Insurance and Credit Guarantee Corporation). This limit was revised from Rs. 1 lakh to Rs. 5 lakh in February 2020. ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━ TYPES OF LOANS ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━ 1. SECURED LOAN — Backed by collateral (asset). Lower interest rate
Home Loan, Car Loan, Loan Against FD. 2. UNSECURED LOAN — No collateral needed. Higher interest rate
Personal Loan, Credit Card Loan. 3. TERM LOAN — One-time loan repaid in fixed instalments (EMIs) over a period. 4. OVERDRAFT — You can withdraw more than your balance up to a limit. Interest paid only on the amount used. 5.
CASH CREDIT — A running credit limit given mainly to businesses against stock/inventory. Similar to overdraft. 6. PRIORITY SECTOR LENDING (PSL) — RBI mandates banks to give 40% of their Adjusted Net Bank Credit (ANBC) to priority sectors. For foreign banks with less than 20 branches, this is 40% of ANBC. ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━
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— WHAT GETS ASKED ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━ • DICGC insurance limit (Rs. 5 lakh) — asked almost every year • Difference between NRE and NRO accounts • PSL target percentage (40% of ANBC) • Difference between Cash Credit and Overdraft • Interest calculation on FD or RD • Minimum tenure of FD (7 days) ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━ SHORTCUTS & TRICKS ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━ SHORTCUT 1 — RULE OF 72: To find how many years it takes to double your money: Divide 72 by the interest rate. At 6% → 72/6 = 12 years. At 9% → 72/9 = 8 years. SHORTCUT 2 — CI vs SI DIFFERENCE: For 2 years: CI - SI = P x (R/100)^2 Example: P = Rs. 10,000, R = 10% CI - SI = 10,000 x (10/100)^2 = 10,000 x 0.01 = Rs. 100 SHORTCUT 3 — RD INTEREST SHORTCUT: For RD, effective principal = Monthly Deposit x n(n+1)/2 x (1/12) Where n = number of months. This gives you the average principal on which interest is calculated. ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━
Write the formula → SI = (P x R x T) / 100
Put values → SI = (50,000 x 8 x 2) / 100
Calculate → SI = 8,00,000 / 100 = Rs. 8,000
Maturity Amount = Principal + SI = 50,000 + 8,000 = Rs. 58,000 Answer: Rs. 58,000 ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━ WORKED EXAMPLE 2 — CI vs SI Difference ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━ Question: Find the difference between CI and SI on Rs. 20,000 at 5% per annum for 2 years.
Use shortcut formula → CI - SI = P x (R/100)^2
Put values → CI - SI = 20,000 x (5/100)^2
Calculate → CI - SI = 20,000 x (0.05)^2 = 20,000 x 0.0025
Answer = Rs. 50 Verification: SI = (20,000 x 5 x 2)/100 = Rs. 2,000. CI = 20,000 x (1.05)^2 - 20,000 = 20,000 x 1.1025 - 20,000 = 22,050 - 20,000 = Rs. 2,050. Difference = 2,050 - 2,000 = Rs. 50. Confirmed! ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━
— THE #1 TRAP ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━ STUDENTS CONFUSE NRE AND NRO ACCOUNTS!
simple trick: NRE = External = money EARNED outside India = Fully Repatriable = Tax-Free interest NRO = Ordinary = income from ORDINARY Indian sources (rent, salary in India) = Partially Repatriable = Interest is TAXABLE In exams, the question will say 'NRI has rental income in India — which account?' Answer is always NRO. Don't pick NRE just because it sounds better.
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