Economics · Banking and Financial Principles
Sarah's father has ₹50,00,000 in a fixed deposit earning 8% interest per annum. The projected inflation rate for the decade is 5%. Concurrently, Mrs. Gupta wants to create a Sinking Fund for her daughter's wedding in 15 years using ordinary annuities. Sarah's 15-year-old brother wants to open an independent, self-operated savings account for his monthly stipend without a guardian's signature. Lastly, a bank customer applies for a home loan of ₹85,00,000 against a property valued at ₹1,00,00,000. Based on economic principles and RBI banking regulations, which of the following evaluations is correct?
- 1The real rate of return is 3%, a minor above 10 years can open a self-operated account, but the home loan must be rejected as the LTV ratio of 85% exceeds the RBI's prescribed regulatory limit of 75% for housing loans above ₹75 lakhs.✓
- 2The real rate of return is 13%, a minor below 18 cannot operate any account independently, and the LTV ratio must always be fixed at 75%.
- 3The real rate of return for the fixed deposit is 3%, Mrs. Gupta requires the Present Value of an ordinary annuity, the minor brother can operate the account independently, and the loan's LTV of 85% is permissible.
- 4Inflation has no impact on nominal fixed deposits, minors can only hold joint accounts, and the LTV framework does not apply to housing loans.
Correct answer
The real rate of return is 3%, a minor above 10 years can open a self-operated account, but the home loan must be rejected as the LTV ratio of 85% exceeds the RBI's prescribed regulatory limit of 75% for housing loans above ₹75 lakhs.
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