SBI MaxGain Home loan account – Standing instruction can be used instead of ECS mandate

POSTED BY JayaprakashReddy ON May 16, 2014 9:48 am COMMENTS (16)

I’ve come across an interesting situation today and I was surprised to know a fact about ECS mandate.

I have a SBI home loan and my EMI is paid from XYZ bank and ECS mandate was signed by me at the time of loan sanction. Now I’ve converted my home loan to MaxGain. This conversion process involves closing of your existing Home loan account and creating a new MaxGain home loan account and then they will transfer entire loan balance to this MaxGain account.

So for ex: My initial home loan account number is 11111, and newly created MaxGain home loan account is 22222. They have closed a/c 11111 and moved the remaining loan balance to new a/c 22222.

Now, ECS mandate, which was submitted to XYZ bank contains the old home loan a/c number (11111). I converted my term home loan account to MaxGain last month. This month 10th is my EMI date. EMI amount was debited on 10th and I got that amount back on 13th saying ECS returns. I immediately approached SBI regarding this and they said this happened because your loan account number changed and I need to contact XYZ bank and ask them to update the ECS mandate with the new home loan a/c number. XYZ bank said I need to generate new mandate and submit it at both SBI and XYZ bank.

Here comes interesting part….

Instead of creating ECS with XYZ I thought why not use my linked SBI savings account for ECS and I immediately asked about it with SBI branch. My SBI savings account branch manager told me that I don’t have to submit any ECS form specially for this, instead I can create a standing instruction to credit same EMI amount to MaxGain/OD account from SBI savings account on same EMI date and that should suffice is what manager said to me. I was shocked and I asked her couple of times to confirm that and she said it is.

Do anyone know about this kind of facility? Till now I was in a impression that ECS is mandatory for any loan account, but it doesn’t look like now.

Another question was raised in my mind after this incident, when we create ECS mandate and submit it to both banks (receiver and sender) then who initiates the request on the EMI date every month? Is it loan account bank initiates the EMI amount transfer request or sender bank automatically initiates the transfer request and sends EMI amount to loan account? Any one got any idea about it?

16 replies on this article “SBI MaxGain Home loan account – Standing instruction can be used instead of ECS mandate”

  1. Akshay says:

    Jayaprakash,
    Thanks for this article. I opened my MaxGain account in March. But ECS did not take place in April. So I went to ask SBI. It looked like they did not have ECS form copy in my file, hence said, I never filled one. Anyways, I filled other one and gave it to them. To which they said, your first deduction would take place only in June, and you have to maintain enough OD balance till then, to avoid fine. Which I had already done.
    It’s June, and my ECS did not take place. I am already paying any extra amount to my OD account. So, in your opinion, should I consult them for this issue, or I should simply create SI?

  2. Sudnya says:

    Hi Jayaprakash,

    I am adding surplus amount in my Max Gain/OD account regularly.

    “On the last day of every month it automatically deducts interest from surplus amount in OD and on 5th of every month it deducts principal part of the loan amount from surplus amount and reduces loan balance by that “. Interest is getting deducted at the last day of every month. but not sure about sure about principal.
    How to set the date to deduct principal on SBI netbanking??

    Book balance – This is Remaining loan amount
    Available balance – This is surplus amount you have in OD account
    Limit – This is remaining loan amount

    What is difference between Book balance and Limit then? and in my case, I cannot see any changes in Limit though there is surplus amount.

    Please Guide.

    Thanks,
    Sudnya

    1. Jayaprakash says:

      Hi Sudnya,

      “How to set the date to deduct principal on SBI netbanking??” – You cannot set this date, bank decides this date, in my case it is 5th of every month. If it is same date for you then observe ‘Available Balance’ before and after 5th then you will see the principal amount deducted from your account.

      Book balance = your total outstanding principal amount – surplus amount in OD
      Limit = your total outstanding principal amount. Limit doesn’t change when you add surplus, it only changes when principal amount is deducted by bank from your surplus amount. It reduces by the principal amount collected for a particular month.

  3. Ashish says:

    Hi Jayaprakash,

    I really need your help.

    Can you please help me with your email address.

    Please drop me an email at : purdendu1@gmail.com

    I really want to set my MAX GAIN Acc the way you are doing.

    Thanks
    Ashish

  4. JayaprakashReddy says:

    Thanks Ashal for providing ECS link.

    I even canceled SI from SBI account now. I parked my surplus amount in OD account. On the last day of every month it automatically deducts interest from surplus amount in OD and on 5th of every month it deducts principal part of the loan amount from surplus amount and reduces loan balance by that amount.

    So, since last three months there is no EMI as such being credited to my home loan account. I’m always keeping enough surplus amount in OD account so that principal and interest amounts are deducted directly from that.

    1. Sudesh says:

      How much amount required to park in OD account if my loan is 21lk.

    2. Mitesh says:

      Hi Jayaprakash..
      Are you still doing the same way. And there are no disadvantages of it? Or they have charged you some penalty for not giving the EMI??

      1. JayaprakashReddy says:

        Yes, still doing the same way. So far no disadvantages of it. I don’t see any in future as well. No penalty too.

        1. ashish says:

          Hi Jayaprakash
          I too have a SBI MaxGa in Home loan account.
          I too want this feature what you wrote here “On the last day of every month it automatically deducts interest from surplus amount in OD and on 5th of every month it deducts principal part of the loan amount from surplus amount and reduces loan balance by that amount. ”

          And after reading your article I approached SBI for doing the same for me and SBI manager said it is not possible.
          I told them that one of your MAX GAIN customer is already doing it. I gave your example.
          Please help me
          What do I say to them to do the same for me. I’m already keeping enough surplus amount in my Home loan MAX GAIN OD account.
          Any technical term or anything which can help here to convince SBI person.

          1. Jayaprakash says:

            Hi Ashish,

            Unfortunately they won’t understand this process as they generally have very little knowledge about how OD account works and what SI means. Most of the time they don’t even know that principal amount is deducted from OD account on certain day of every month irrespective of your EMI date. Even my home loan account branch manager doesn’t know about it. When I asked them about interest and principal certificate, they were clueless as there is no EMI amount credited to home loan account every month. Then I had to explain them what is the principal and interest amount deducted every month and how much it was, based on that information they provided certificates to me in the middle of the year. It took couple of hours to me to explain and convince them.

            If you want to use this, then simply cancel your standing instruction and it automatically starts deducting from your OD balance. 5th of the month is for me, not sure what will be the date for you, so don’t take 5th of the month as common date for everyone.

            If you want to be sure about how principal and interest amount gets deducted, then observe three fields in your OD account summary section.

            Book balance – This is Remaining loan amount – Available balance
            Available balance – This is surplus amount you have in OD account
            Limit – This is remaining loan amount

            Observe that ‘Limit’ reduces when they deduct principal amount from your account. This principal amount depends on the EMI schedule provided to you initially, this will not change irrespective of the surplus amount you have in your account. There will be no entry in detailed statement of your OD account for this deduction.
            Whereas your interest amount deduction will have an entry in the OD account statement on the last day of the month. For interest amount, your available balance amount will be used.

            1. Ashish says:

              You are awesome!!

              Thanks a lot!!

              And Thank you again for your reply.

            2. Ashish says:

              Hi Jayaprakash

              One very important thing I want to ask you :

              Please login to your loan account https://www.onlinesbi.com/

              Then on top please click on “Enquiries ” Tab

              On the left hand side section under Jump to:

              Please click on “Home Loan Int. Cert ”

              Select your loan account

              and click SUBMIT

              I am very curious to know what does this online “Home Loan Interest Certificate” Shows you

              Repayment towards Principal Rs. : ?????
              Repayment towards Interest Rs. : ?????

              May be bank managers and bank staff do not know anything about the OD account work process however COMPUTER / SYSTEM
              should generate the correct “Home Loan Interest Certificate” for you .

              Am I right ?

              Please reply

              I am waiting for your reply.

            3. Kumar says:

              Hi Jayaprakash, Some mysterious problem with this Max Gain HL Account is I paid 2 EMIs till date, these deducted from HDFC and transferred to HL account.

              My HL Account amount is 56L, and this is shown as Limit, and Book Bal is shown as 22.6 and Avial Bal shown as 32.2, combining both it is 56L, which means that bank has not deducted any principal amount till date, which is strange in my opinion, please provide your feedback, why bank is not taking any principal thought I’m paying EMIs

            4. Jayaprakash says:

              are you paying Pre-EMI?
              BTW, 22.6+32.2 is not 56

      2. Jayaprakash says:

        Mitesh,

        One disadvantage I saw over the period. If you are a salaried employee and require principal and interest certificates in the middle of the year for income tax declaration, it will be very difficult to get that as none of the staff in bank understands how it works without EMI. If we tell them what is the EMI amount, still they won’t be able to figure out interest and principal amount part you paid till date. You have to provide them those calculations with proof and if they are convinced they will help you, otherwise you will be in trouble.

  5. ashalanshu says:

    Dear Jayaprakash, my own SBI Max Gain EMIs are running through SI from my SBI SB account.

    Regarding, ECS thing in detail, please check this.

    http://www.rbi.org.in/commonman/English/scripts/ecs.aspx?id=207

    Thanks

    Ashal

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