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Reverse Mortgage Products: an Indian Banking Perspective
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This paper endeavors to show that the growth has been sluggish in the past because of lack of awareness among the customers, lack of knowledge, some regulatory factors and confusion relating to tax treatment. The banks felt the need for a complementary insurance product that will cover the borrower if they outlive the tenure of the loan. The paper also would throw light on the fact that the accounting treatment of RM has posed a contradiction towards the concept of revenue recognition and doctrine of conservatism as the assured anticipated incomes became difficult for disclosure. On the other hand the calculation of the indexed cost of acquisition has become difficult due to the controversy relating to the date of acquisition. This has led to the difficulty in computation of the Capital Gains arising out of the transfer.
The study therefore likes to focus on the two-fold aspect of RM as a product: firstly, a study on the future opportunities and challenges that will decide the fate of Reverse Mortgage as an innovative product for the Indian Banking Industry; secondly, the study focuses on the accounting and taxation dilemma arising out of the reporting methodology and disclosure of RM.
Keywords
- Chandrasekhar, V., Tiwari, P., & Sanghera, K. (2007). Reverse Mortgage in India: Social Implications. Retrieved from http://www.isb.edu/ICREI/File/ReverseMortgagesocialimplications. pdf (accessed on August 23, 2011).
- Conference on Reverse Mortgages in India, (2010). Retrieved from http://www.business-standard.com/india/news/conferencereverse-mortgages-in-india/95154/on (accessed on August 23, 2011).
- Mohan, R. (2007), Financial Sector Reforms in India:Policies and Performance Analysis. Retrieved from http://www.rakeshmohan.com/docs/RBIBulletinJuly2006-1.pdf (accessed on August 23, 2011).
- Nakajima, M., & Telyukova, I. (2011). Reverse Mortgage Loans: A Quantitative Analysis. Retrieved from http://ssrn.com/abstract=1887466 (accessed on August 23, 2011).
- Shan, H. (2009). Reversing the Trend: The Recent Expansion of Reverse Mortgage Market. Retrieved from http://www.federalreserve.gov/pubs/feds/2009/200942/200942pap.pdf (accessed on August 23, 2011).
- Tariq, M. (2011). History of Banking in India. Retrieved from http://www.scribd.com/doc/33922015/24487141-History-of-Banking-in-India (accessed on August 23, 2011).
- Wang, L., Valdez, E., & Piggott, J. (2007). Securitization of Longevity Risk in Reverse Mortgages. Retrieved from http://papers.ssrn.com/sol3/papers.cfm?abstract
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