Banking: Jairam Sridharan

Some banks have announced charges for ATM withdrawals beyond the first five, including for their own customers. How can account holders save on this extra cost?
Most readers are likely to see no impact of the newly-announced ATM withdrawal charges. This is because most banks continue to permit eight free ATM transactions (five on own bank ATMs and three on other bank ATMs) a month. Most customers require and use only two or three ATM transactions a month, and are unlikely to witness any increase in their ATM charges.

In addition, customers should consider using more convenient non-cash payment modes to reduce the usage of ATMs such as debit cards and credit cards at merchants, mobile banking and internet banking.

A private bank I was trying to open a savings account with offered me a Rs 1-lakh personal accident cover. What is the advantage of buying an insurance policy bundled with the account? Do banks offer a lower premium for such policies?
The personal accident cover that private banks offer along with savings accounts are typically a complimentary feature with their debit cards. The customer pays no additional premium to obtain this.

However, most banks insist customers use their debit card at a merchant outlet at least once in six months for this accident cover to remain active. That is another reason for customers to use their debit cards at merchants directly, rather than using them only to withdraw cash at an ATM.

What is the difference between a loan and an overdraft?
A loan, or more precisely, a term loan, has a fixed duration in which it needs to be repaid. The bank offers you the loan amount upfront, and then on a monthly basis you as the customer, pay equal amounts (called EMIs) to repay the loan within the preset tenure of the loan. An overdraft, on the other hand, is a general credit line the bank makes available to you, which you can use based on your needs. For instance, if you have an overdraft of Rs 10 lakh, you might withdraw Rs 1 lakh today, repay Rs 50,000 in a few days, then withdraw another Rs 3 lakh and so on, based on your need. You need to serve the interest component on a regular basis, but you have the flexibility to use all or part or none of the line of credit on offer to you at any point. This product is usually preferred by people in business who want to manage their day-to-day cash flows better.
The views expressed are expert's own. Send your queries to yourmoney@bsmail.in

Today, Jairam Sridharan, President of Axis Bank, answers your questions