5 changes from January 1 that will impact your money

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January 1, 2021, will see a few rule changes that will impact the common man’s money. Here is a look at five such changes and how they are likely to impact you and your personal finances.

  • Positive Pay mechanism for cheques

The Reserve Bank of India (RBI) in its August 2020 bi-monthly monetary policy announced that a Positive Pay System for cheque clearing would be launched from Jan 1, 2021. The Positive Pay mechanism is meant for use for large value cheques. As per an RBI notification dated September 25, 2020, banks are required to enable this for all account holders issuing cheques above Rs 50,000.

Under this system, the issuer of the cheque is required to submit to the bank certain details of the cheque such as date, name of the beneficiary/payee, amount etc., electronically via SMS, mobile app, Internet banking, ATM etc. These details will then be used to verify the genuineness of the cheque that has been presented under the CTS.

The RBI notification states that availing this facility is at the discretion of the account holder, but banks may consider making it mandatory for cheques valued more than Rs 5 lakh.

IMPACT ON YOU: The apex bank said that the Positive Pay mechanism is expected to augment customer safety in cheque payments and reduce instances of fraud on account of tampering of cheque leaves.

  • Relaxation in e-mandates for recurring transactions

In its August 2020 bi-monthly monetary policy RBI also allowed processing of e-mandates of credit and debit cards for recurring transactions with a limit of Rs 2,000. In its December 2020 bi-monthly monetary policy, the apex bank announced that this limit would be hiked from Rs, 2000 at present to Rs 5000 starting Jan 1, 2020.
As per the statement by the central bank, “Please refer to our circular DPSS.CO.PD.No.447/02.14.003/2019-20 dated August 21, 2019, vide which relaxation in Additional Factor of Authentication (AFA) was permitted while processing e-mandates / standing instructions on cards and Prepaid Payment Instruments (PPIs) for recurring transactions with values up to Rs 2,000, subject to conditions listed therein. These instructions were later extended to Unified Payments Interface (UPI) as well. Based on requests received from stakeholders and given the sufficient protection available to customers, it was announced in the Statement on Developmental and Regulatory Policies dated December 4, 2020, that the aforesaid transaction limit will be increased. Accordingly, it has been decided to increase the above limit for AFA relaxation to Rs 5,000 per transaction, with effect from January 1, 2021.”

IMPACT ON YOU: This move will help customers make payments of up to Rs 5,000 without the two-factor authentication process by giving an e-mandate for credit and debit cards. This will make it easier for customers to make small-value payments digitally.

  • Relaxation for contactless card transactions

With effect from January 1, 2021, customers can make transactions up to Rs 5,000 using contactless cards without additional two-factor authentication.

As per the apex bank statement, “The present COVID-19 pandemic has underlined the benefits of contactless transactions. Keeping this in view and based on stakeholder feedback, it was announced in the Statement on Developmental and Regulatory Policies dated December 4, 2020, that per transaction limit for AFA relaxation for contactless card transactions will be increased. Accordingly, given the sufficient protection available to users, it has been decided to increase the per transaction limit to Rs 5,000/-. All other requirements, including the discretion of cardholder to use contactless or contact mode of transaction, shall continue to remain applicable, as hitherto. This directive is issued under Section 10 (2) read with Section 18 of Payment and Settlement Systems Act, 2007 (Act 51 of 2007) and shall come into effect from January 1, 2021.”

IMPACT ON YOU: As per industry experts, the move will help consumers make more contactless payments in a hassle-free manner and thereby facilitate avoidance of touch-based payments in the current pandemic.

Also Read:
RBI hikes limit for the contactless card to Rs 5,000

  • Insurers to provide standard term life insurance plan

The Insurance Regulatory and Development Authority of India (IRDAI) has mandated life insurance companies to provide a standard individual life term insurance policy from January 1, 2021. This standard term insurance product will be called Saral Jeevan Bima with the insurer’s name prefixed to the product name. The Saral Jeevan Bima is expected to offer a minimum sum insured of Rs 5 lakh and maximum sum insured of Rs 25 lakh.

IMPACT ON YOU: According to IRDAI’s press release issued on October 15, 2020, “There are many term products in the market with varying terms and conditions. Customers who cannot devote adequate time and energy to make informed choices find it difficult to select the right product. Also, products may not be available for the intended sum assured. To take care of this situation and to make available a product by all life insurers that will broadly meet the needs of an average customer, it is felt necessary to introduce a standard, individual term life insurance product, with simple features and standard terms and conditions. Such a standard product will make it easier for the customers to make an informed choice, enhance the trust between the Insurers and the insured, and reduce mis-selling as well as potential disputes at the time of claim settlement.”

Also Read:
All the details related to standard term insurance policy

  • FASTags mandatory for four-wheelers

From January 1, 2021, FASTags will become mandatory for all four-wheelers including those four-wheelers purchased before December 1, 2017. The Ministry of Road Transport and Highways has notified that all four-wheelers regardless of the year of manufacture and age should mandatorily have it.

IMPACT ON YOU: FASTags are prepaid rechargeable tags for toll collection that allow automatic payment deduction. Using a FASTag, you will not have to stop your car at toll plazas to pay for the toll. FASTags can be bought via 22 certified banks. They are also available on e-commerce platforms such as Amazon.

  • Changes in the multi-cap mutual fund schemes

The Securities and Exchange Board of India (SEBI) in its circular dated September 11, 2020, issued new norms for multi-cap mutual fund schemes. As per the new norms, multi-cap mutual fund schemes are mandated to invest at least 25% each in large-cap, mid-cap, and small-cap stocks. Earlier, this category had the flexibility to invest anywhere.

Sebi has given fund houses time till January 2021 to comply with the new norms. It has also been reported that many multi-cap schemes may shift their category to ‘Flexi-cap’ rather than comply with the new rules. The new category of Flexi-cap has also been recently introduced by SEBI.

Also Read:
These leading multi-cap mutual funds will turn into Flexi cap schemes

IMPACT ON YOU: Therefore, if you have invested in a multi-cap scheme then there may be some changes in the scheme category or its investment pattern across large, mid and small caps.

“Until now, multi-cap funds in India have always had a distinct large-cap tilt in their portfolios. With no specific restrictions on allocation to various market cap segments, these had complete freedom to invest anywhere in any proportion. Going purely by math, the revised norms will radically alter your multi-cap fund’s risk profile. Fund managers will have to sell off a chunk of the large-cap portion and buy mid-and small-cap stocks to meet the regulatory requirement,” according to an ET Wealth article. Click
here to read the full story.

Alternatively, your hitherto multi-cap scheme may shift to the ‘Flexi-cap’ category and thereby not have to comply with the changed norms for the multi-cap category.

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