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Debt ServicingRMD, MHO

Frequently Asked Question and theirAnswers about SIDBI Fixed Deposit Scheme

Frequently Asked Questions Answers

What is the name of theScheme

The name of the Scheme is SIDBI Fixed Deposit[FD] Scheme.

Under what rules / guidelines itis governed

The FD Scheme is governed by RBI guidelinesto Financial Institutions, as issued from time totime.

Who can deposit/invest moneyin SIDBI FD

Individuals - Resident individuals and Minorsthrough GuardiansOthers - HUF, Partnership Firms, ProprietaryConcerns, Companies, Body Corporates, Banks,Societies, Association of Persons, Trusts, Relief

Funds, NGOs, Public Sector Undertakings,Central/State Govt. Departments, PF Trusts, PortTrusts, Mutual Funds, Welfare Funds, Govt.Universities / Institutions, Private EducationInstitutions, Statutory bodies are authorised toinvest in SIDBI FD

Can Non Resident Indiansinvest money in SIDBI FD

Yes. NRIs can now invest money in SIDBI FD,subject to certain conditions.

What are the deposit options Cumulative, Quarterly and Annual InterestPayment

What is the minimum andmaximum tenure of SIDBI FD

Minimum - 12 months and in multiples of 1month thereafter with maximum tenure of 60months.

What is the minimum amountone can invest in SIDBI FD

Minimum deposit of Rs.10,000/- and in multiplesof Rs.1,000/- thereafter.

How is the payment to bemade

The payment for investment in SIDBI FD has tobe made by account payee cheque / demanddraft payable at the centre of deposit, drawn infavour of SIDBI. Cash is not accepted.

Where one can one submit anapplication and cheque / draftto be invested in SIDBI FD

One can deposit an application with cheque atany Branch Office of SIDBI.

What are the documents taken

at the time of accepting theapplication

Documents required to comply with KYC norms :

The details are printed on the application form forvarious categories of investors.

Individual Depositors Individual Depositors need to submit copy of Passport / Photo PAN Card / Driving License /Voter Identity Card / Photo Ration Card / Anyother identification with photograph [subject tosatisfaction of SIDBI] as proof of identity. Asproof of address, individual depositors, need tosubmit copy of Latest Telephone Bill / LatestElectricity Bill / Latest Bank Account Statement /Latest Demat Account Statement / Ration Card /

Registered rent agreement / Any other proof tothe satisfaction of SIDBI.

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Companies Certified true copy of Certificate of Incorporationand Memorandum & Articles of Association,Resolution of Board of Directors to place moneyas FD, identification of those who have authority

to operate, identification of authorised signatoriesshould be based on photographs and signaturecards duly attested by the Company, Power ofAttorney granted to its managers, officers oremployees to transact business on its behalf,copy of PAN allotment letter and copy of thelatest telephone bill

Partnership Firms Certified true copy of Registration Certificate, if partnership is registered, Partnership Deed,Power of Attorney granted to a partner or anemployee of the firm to transact business on itsbehalf, any officially valid document identifying

the partners and the persons holding the Powerof Attorney and their addresses, telephone in thename of the firm/partners.

Trusts and Foundations Certified true copy of Certificate of Registration, ifregistered, Power of Attorney granted to transactbusiness on its behalf, any officially validdocument to identify the trustees, settlors,beneficiaries and those holding Power ofAttorney, founders / managers / directors andtheir addresses, resolution of the managing bodyof the foundation / association, Photograph ofoperating trustees, Telephone / Utility Bill,

Identification and address proof document of theperson holding on attorney to transact on itsbehalf

Clubs, Societies andAssociation

Certified true copy of Resolution for keepingmoney in SIDBI FD, copy of bye-laws, proof ofidentity of authorised signatories, copy ofcertificate of registration in the case of registeredclubs, societies and associations

Hindu Undivided Family [HUFs] Declaration of the Karta, Proof of Identification ofKarta, Joint Hindu Family letter signed by all theadult coparceners

Unincorporated Association ora body of individuals Resolution of the Managing Body of suchAssociation or body of individuals, Power ofAttorney granted to him to transact on its behalf,An officially valid document in respect of personsholding an attorney to transact on its behalf, suchinformation as may be required to establish thelegal existence of such an association or body ofindividuals. 2

How important is the PANdocument

PAN has been made mandatory for all deposits.This is to obviate the problem of deduction ofTDS, and issue of TDS Certificate, when thedepositor makes multiple deposits in different

branches.Are joint deposits accepted Joint deposits are accepted from individuals.

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Joint deposit can be made by maximum of threeindividuals.

A mother wants to make adeposit in the name of her

minor child (U/G of themother), with the father beingalive; can it be accepted.

Yes, it can be accepted. The maturity amounthowever should be paid in the name of the minor

only, with the phrase U/G so and so (name ofmother).

Nomination

Is nomination facility available Nomination facility is available for single and jointdeposits received from individuals

One FD is in the name ofHUF / under PoA / name of aminor. Can a nomination bemade.

No, when deposits are in the name of HUF /under PoA / minor no nomination can be made.

Depositor(s) wants toadd/delete the nomination, can

it be done after FDR has beenissued ?

The nomination can be cancelled or substitutedat a later date by the depositors. Any request for

cancellation / addition of nominee after thesubmission of application form should be signedby all the depositors irrespective of mode ofholding.

What is the benefit of nomination to a depositor ?

In the event of demise of the sole or all jointdepositors, the fixed deposit amount togetherwith interest thereon, will be paid to the nomineeas stated in the application or nominationsubstituted by the investor.

What should one do if adepositor, though being eligiblefor making a nominationwishes not to do so ?

In the event of demise of the sole or all jointdepositors and in case nomination has not beenprovided, SIDBI will recognise the title of suchperson(s) to the deposit who would produce therequisite legal representation to the satisfactionof SIDBI. In case of demise of one of the JointDepositors, SIDBI will recognise the title of theremaining Depositor(s) for receiving paymentrelating to the deposits as given in the depositApplication.However, operating office should henceforth takea letter from the investor regarding not making anomination.

Interest

How is the interest calculated ? Interest will accrue from the date of deposit.Interest is calculated as at end of every quarteri.e. March 31, June 30, September 30 andDecember 31 every year. The Bank has movedto a system of quarterly compounding 3wefSeptember 1, 2009.

Is the interest compounding Yes, interest accrues from the date of deposit.Interest is compounded at end of every quarteri.e. March 31, June 30, September 30 andDecember 31 of each year.

Income Tax

Is the interest on depositsubject to TDS

Interest amount of more than Rs.5,000/- perfinancial year attracts TDS provisions i.e ifinterest payable / accrued is more than

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Rs.5,000/- the same will be taxable [if Form 15 G/ H, exemption from IT is submitted, TDS will notbe deducted].

What is the threshold limit of

applicability of TDSIs the TDS threshold limitcomparable with commercialbanks

In respect of commercial banks, the TDSthreshold limit is Rs.10,000/- and in respect ofSIDBI FD, TDS threshold limit is Rs.5,000/-.

Why only Rs.5,000/- isexempted for TDS, in case ofcommercial banks it isRs.10,000/-

The rules applicable to commercial banks are notapplicable to SIDBI, which is a FinancialInstitution.

Is the SIDBI FD covered underdeposit guarantee/insurance

Is the deposit rated by any

credit rating agency.

No.

However, SIDBI FD is rated by CARE and therating available is AAA (pronounced TripleAAA). This rating implies best credit quality,

offering highest safety for timely servicing of debtobligation and carry minimal credit risk. This isthe highest rating that a long / medium term debtinstrument can be assigned by CARE.

What are interest paymentoptions

Interest can be paid quarterly, annually andcumulatively [i.e. at the time of redemption /maturity alongwith principal] on the request of thedepositor.

Can one get interest on amonthly basis.

No, interest is paid only quarterly, annual basisand cumulative at the time of maturity.

Are At Par cheques issued forinterest payment

Yes At Par cheques are issued for interestpayment

Is the interest /maturity amountpaid by way of ECS

Wherever possible SIDBI is attempting to pay theinterest by way of Electronic Clearing System.BOs have to take this initiative further at theirrespective centres.

Will SMS/Mail alerts will besent about maturity date ofSIDBI FD

Yes, it is being sent 14 days prior to thematurity, if the mobile number is correctly fed inthe system. RMD has also circulated a format ofreminder letter (bilingual) for informing theinvestor, 14 days in advance, about theimpending maturity.

What are benefits for senior

citizens

The Senior Citizens get additional 0.50 bps

interest on SIDBI FD, as on date.Is the deposit automaticallyrenewed

Yes, SIDBI FD can be automatically renewed,only if the investor has opted for same at thetime of deposit. 4

If renewed automatically, doesone get the same old rate orrate of interest will change

The interest rate applicable at the time ofrenewal is applicable and old rate [whetherhigher or lower] is not applied for renewal.

Is premature withdrawal of FDpossible

Premature withdrawal of FD possible only incases of individual deposits [beforecompletion of one year] if the money iswithdrawn for medical treatment, educationpurpose etc. In respect of other fixed

deposits, premature is not allowed beforeone year from the date of deposit.

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If yes, what are the terms; doesone have to pay a penalty forpremature withdrawal

If the FD is withdrawn before six months fromthe date of deposit, no interest is paid. Ifwithdrawn between six months and one year,interest at saving bank interest rate is paid. If

withdrawn after one year, applicable rate ofinterest minus one percent, for similar tenureof FD, on the date of deposit, is paid.In case of premature withdrawal of depositunder non-cumulative interest option, theexcess amount, if any, being the differencebetween the amount of interest already paidat the rate stated in the Term Deposit Receiptand interest payable at the above applicablereduced rate owing to premature withdrawal,shall be deducted from the Principal amountof the deposit and the resultant balance

amount shall be paid to the depositor /entitled person. Similarly, for prematurewithdrawal of deposit under CumulativeInterest option, the maturity value of thedeposit will be recalculated on the basis ofthe applicable interest rate and revisedmaturity value shall be paid.

Is SIDBI FD transferable SIDBI FD is not transferable

Is loan facility available againstSIDBI FD

Loan facility is not available against SIDBI FD

Can a SIDBI FD be offered asa collateral

Yes, only if it is made out of borrowers ownfunds.

Borrower A has taken a loanfrom SIDBI. Entity B isagreeable to give a SIDBI FDas collateral, Is it acceptable

No, SIDBI FD as collateral is acceptable only if itis in the name of the borrower. Third party SIDBIFDR as collateral is not permitted as per extantguidelines.

FD has been placed ascollateral against a loan and itturns into NPA. Can theoverdues be adjusted from theFD.

No; foreclosure/premature withdrawal of FDplaced as collateral is strictly not allowed.

Brokerage

Is brokerage available on

SIDBI FD

Brokerage is available on SIDBI FD to

empanelled brokers for FD amounts of less thanRs.10 lakh.

What is the quantum of brokerage available5

The brokerage structure is as follows : a]Brokerage of 15 5bps on deposits of 12 and 13months, b] Brokerage of 25 bps on deposits of14 months and upto 60 months. Brokerage is notavailable for FDs carrying differential rate ofinterest [if prevalent], FDs given as collateralsecurity, and FDs mobilised from senior citizensand staff. No brokerage is available on renewalof deposit(s). The above rates and eligibility issubject to change from time to time. BOs may

refer RMD circulars on the issue.What will happen to brokerage The brokerage is not to be recovered in such

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paid on a FD if it hassubsequently been offered as asecurity for a loan extended bySIDBI.

cases.

Is the Form 15 G / H requiredto be given every FinancialYear for exemption from Tax

Form 15 G / H is required to be submitted induplicate before April 15 every Financial Yearfor exemption from Tax during that Financial year

Even after submission of Form15 G / H, if TDS is deducted/bymistake, can it be refunded tothe investor

Refund of tax which is deposited with Govt. is notpossible.

What is to be done with Form15 G / H

Duly filled in Form 15 G/ H is to be submitted tothe Income Tax Office. RMD has issued a notedated February 10, 2009 to all BOs.Being a statutory requirement, care should beexercised to see that submission is done in time.

When can one get the TDScertificate

On filing of ETDS, TDS certificate is issued toinvestors.

Maturity not claimed 14 days prior to maturity date SMS is sent tothe investor [if mobile number is provided by theinvestor and fed correctly by the concerned BOin the system]

14 days prior to maturity date, a letterreminding the investor about the maturity of theFD is sent and investor is requested to surrenderthe FDR for renewal/redemption.

Follow-up and telephone calls to the investor.

If not redeemed in 2 years from date ofmaturity, the amount is transferred to AccountCode 1227 - Unclaimed Deposit Account underFDS.

An entity has received acontribution from a foreigncountry / entity and wants toplace a deposit with SIDBI. Isthere any extra caution to beexercised.

The Foreign Contribution (Regulation) Act, 1976requires that the associations having a definitecultural, economic, educational, religious andsocial programmes receiving foreign contributionshould get themselves registered with theMinistry of Home Affairs, Government of Indiaand receive foreign contribution only throughsuch one of the branches of a bank, as an

association may specify in its application forregistration with the Ministry of Home Affairs.Further the said Act provides that everyassociation referred to in 6sub-section (1) ofSection (6) may, if it is not registered with theCentral Government, accept any foreigncontribution only after obtaining prior permissionof the Central Government.There are also certain organisations of a politicalnature, not being political parties (including theirbranches/units) specified by the CentralGovernment under Section 5(I) of the ForeignContribution (Regulation) Act, 1976. Theseorganisations also require prior permission of the

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Central Government for accepting any foreigncontribution.

An investor is now sick / old /incapacitated by an accident or

other reasons and is not ableto discharge the FDR onmaturity. What should be done.

A medical certificate has to be obtainedconfirming the incapacitation and not being able

to sign. In such cases a thumb or toe impressionof the sick / old / incapacitated depositor shouldbe obtained with two independent witnessesknown the BO.

A depositor has died. What isthe procedure for settling theFD.

The payment can be made to the nominee orwherever the survivorship clause (either orsurvivor / former or survivor / Anyone or survivor)is there, payment can be effected to thesurvivors.

For any other issue / clarification , please contact :

Resources Management Department, SIDBI, Mumbai(e-mails : [email protected], [email protected], [email protected],[email protected], [email protected])

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