Social Security in India - Pre and Post-Independence
In the past i.e. pre independence era there used to be joint families and the aged senior citizen did not require social security as the members of Hindu Undivided Families (HUF) will take care of the family and the senior most male member of the HUF will remain as Karta or head of the joint family. After independence when there was population outburst the Government of India launched many awareness programs about family planning and need for smaller families. Over a period of time the younger generation started moving from villages to urban centers in search of green pastures leading to more and more nuclear families. Large number of aged senior citizens are reluctant to leave their home towns and prefer to live in their own houses and their grown up children find it difficult have big rented houses in urban centres due to high costs. You must have seen the great Indian Movie "Baghban" which also depicts the family scene where the sons isolate their parents as they feel the parents as a burden and threat to their freedom.
In India employees in the government sector used to get pension after retirement but the private sector employees did not have any regular source of income. Why to talk of employees alone, even the small businessman, doctors, lawyers, agriculturists require regular source of income in their old age when they have contributed to the exchequer during their active life. We save for future to meet with unforeseen expenses and not to support normal living. How can a small rickshaw puller or hawker save money? In 1991 one of my friends father got retired from job in the private sector and the monthly regular income stopped immediately. I wrote a detailed letter to then Finance Minister S.Manmohan Singh, who also remained Prime Minister of India for two terms ending April,2014. The Hon'ble FM took notice of the things and I am happy that EPS 1995 scheme was introduced for employees in the private sector. Now NPS scheme is also a step in the right direction for launching Social Security measures in India.
PNB Baghban Scheme for Honourable Senior Citizens
Some Banks in India have launched the reverse mortgage scheme to mitigate the sufferings of the senior citizens. Punjab National Bank, the first Swadeshi Bank, founded by the veteran India leader Lal Lajpat Rai ji in 1895, came out with a noble scheme called "PNB Baghban Scheme" based on the Indian movie "Baghban" in which role of senior citizen is played by the Big B that is Amitabh Bachhan of the fame of KBC.
Salient Features of PNB Baghban Scheme
As per the scheme the senior citizens can mortgage their House property for getting Regular Monthly Income for their daily needs. Senior Citizens are not to REPAY the loan during their life time and Legal Heirs can repay the loan to inherit the property. In such a way Senior Citizens will neither lose their shelter nor have they to be dependent for their daily needs. Loan can also be repaid out of sale proceeds of property after the death of both (Husband and wife) as Regular Monthly Instalments will continue to be payable to spouse after the death of the life partner. Surplus of Sale Proceeds is payable to legal heirs. Monthly income is fixed on the basis of current market value of the house property, remaining life expectancy of the senior citizen as per the scheme. This way the senior citizens will get the monthly income regularly in addition to one time lump sum payment to meet the unforeseen medical expenses as per Terms and Conditions of the scheme. This welcome gesture by the Banks in India but the public is mot making use of such Social Security measures due to ignorance.
Appeal: Please see that how many honourable senior citizens are living in your close vicinity and they do have House Property in their names or in the name of their Spouses. Please make them aware of the scheme and I am sure helping them will make you happy from the core of your heart. It is never too late to start an effort for a noble cause.
This scheme is not only in PNB and I have even seen in Indian Bank for quite some years. As stated in your forum, you may change the first line to give a positive approach instead of negative appeal which may not be good searching through on-line. It may be like this: If you own a home and wanted to live on your own even you do not have any other source of income and PNB Baghban Scheme will help you like Baghban.
Thanks Saroja. I have changed the summary, first paragraph as suggested. Thanks for feedback.PNB was the first Bank to introduce such a noble scheme and other Banks followed thereafter and now almost all banks have introduced the scheme but public is not aware of such schemes. I have used the IndiaStudyChannel platform to make the younger generation aware of such schemes so as to draw benefits from the scheme.
The Government has made changes in the Reverse Mortgage Scheme and the author wants that readers may get the updates and its likely impacts.
Important Changes to Reverse Mortgage Scheme for Senior Citizens:
The Government of India, finding it difficult to provide social security to the Senior Citizens, has extended the period of Reverse Mortgage Scheme from 20 years to the remaining life span of the person, borrowing annuity from the banks or financial institutions by mortgaging his residential property.
Amendments are made to existing Reverse Mortgage Scheme, 2008 which entitles any senior citizen above the age of 60 years to get monthly annuity from the Banks by mortgaging his/her house without loosing the ownership and possession of the house. Previously this period of annuity payments was restricted to maximum 20 years from the date of availing the facility from the Bank or the financial institution. Now the period of receiving annuity is increased to "the remaining life span of the senior citizen".
According to amendment, Life Insurance Corporation of India and other insurer companies registered with IRDA are also included as annuity paying institutions. On the event of death of the senior citizen’s the outstanding loan along with interest is recoverable through sale of the house property. However the borrower or legal heirs can also repay the loan with accumulated interest to get the mortgage released without resorting to sale of the property.
Likely Impact of the amendments:
As per my opinion these policy changes, no doubt, will allow the senior citizens to arrange financial social security of their own but with the passage of time the following issues are likely to crop up which can be taken care at the initial stages lest it should become another burden for the future society.
Bank’s funds will get blocked as there will be no repayment during the life time of the senior citizens and there will be asset liability mismatch for the lending institutions. There will be a shift from credit for productive purposes to unproductive purposes and so many houses will be available for sale by Banks resulting into fall of real estate prices as compared to the valuation of the houses taken at the time of deciding annuity for the senior citizens. The condition of such houses will also deteriorate with the passage of time making it unhealthy for living as senior citizens will not be able to maintain their houses, repairs, white washing effectively. Short fall in realization of sale proceeds of houses by banks will be the instant loss of the lending institutions as happened during great American Depression popularly known as Sub Prime Mortgage Loans Crisis which caused failure of Big Investment Banks like Lehman Brothers.
How to cope with the situation in advance - Views of Author:
Senior Citizens availing the facility of reverse mortgage be assisted to make their registered will of their own free will in respect of his/her sons, daughters, relative who may take care of the senior citizens physically, medically or emotionally. Such registered wills may be deposited with the lending institutions along with mortgage deeds so that the lending institutions can inform the willed persons to contact them in case of demise of the senior citizens. First preference be given to such willed persons and thereafter preferences be given to other legal heirs, declared by the borrowing senior citizen, for either repaying the loan or getting the loan transferred in their name as per Home Loan Schemes as per their repaying capacities, keeping in view that such willed persons or legal heirs will also become senior citizens in future to avail the reverse mortgage loans and so on.
The article is really a good piece of information as well as advice in today's materialistic world when small and nuclear families are disintegrating and there is no one to look after the aged parents who not only need financial help but also physical help. Let the Insurance companies, who are insuring the senior citizens for life or health, make a courtesy call every day to their clients who are above the age of 55. I am sure that Insurance Companies will be saving huge amounts on health or medical claims if they come up with Old Age shelters run by the Insurance Companies. I can foresee that such insurance companies which will provide the necessary shelter, food, 24 hour medical care in lieu of the insurance premiums will be the most sought after insurance products making the senior citizens to lead a dignified happy life even after retirement. It will not be a surprise if the Banks allowing reverse mortgage enter into tie up arrangements with insurers to make the above vision a real reality.
Once you go for Reverse Mortgage to branch concerned staff does not respond to with positive or encouraging attitude.
I encourage this type of reverse mortgage schemes for the benefit of senior citizen. If the concerned staff is not showing any positive attitude for such scheme matter can b taken up with the appropriate authority.
To concentrate on the financial wishes of senior citizens as they are owner of the self occupied property (house) which help them to generate income and other benefits as per their daily needs.
1. With the benefit of these schemes, senior’s citizen shall apply who has their own flat / residential property.
2. They are eligible by considering the age 60 and above.
3. They should be Indian occupant.
Meet the requirements for highest amount of loan considering the margin
1. The amount of the qualified loan is depending on the value of the resident property /flat by considering 20 % margin.
2. The highest amount of loan is limited to 100 Lacs. along with the interest and should be remunerated on monthly reverse annuity basis
Loan Extension :-
The amount of loan is extended i.e. 15 – 20 years or till death of last existing next of kin ( person ) out of two condition whichever is previous. On the basis of individual age shows below the amount monthly installment this is calculated on Reverse Annuity basis
Tenor (yrs) :- 15 16 17 18 19 20
Monthly Installment (Rs.) :- 200 170 150 130 110 100
A maximum Rs. 15 lacs is considered as payment for lump sum amount under this scheme but by considering below points
B. To fulfil medical requirement of senior citizen, his / her partner and dependents
How to recover the Loan ?
During the period of the borrower there is no payment. Though the loan will be covered only after passing away of both of them (Dependent of each other i.e. Husband or wife)
In order to settlement of the loan with considering the interest amount should be fulfilled by trading of the residential property and any additional to be compensated to beneficiary
How loan is per-pay ?
There is good option that the loan is per-pay at any time. The 2 % charges are imposed if loan is taking over by other financial institution or bank.
15 days of total amount of each months loan instalment is subject to highest of Rs. 15,000 Excluding Service Tax and Education Cess
Documentation/ Inspection Charges
Right to cancel your loan
The senior citizen can cancelled the transaction also for that they are given upto 10 days to check whether they will fulfil all their requirement for the sanctioned loan.