7 new rules impacting the savings and investments from January 2021

7 new rules impacting the savings and investments from January 2021

Your money circumstances relating to savings and investments will observe a few important changes in 2021. From writing cheques to swiping of credit cards to assigning advances in mutual funds, there are a few key personal finance changes to keep an eye on while walking into 2021. Here are some of them.

Positive Pay device for cheques

To further improve customer safety in cheque payments and minimize instances of fraud occurring on account of tampering of cheque leaflets, RBI has now chosen to offer a mechanism of Positive Pay for all cheques of value Rs 50,000 and more important. Under this device, cheques will be processed for payment by the drawee bank based on knowledge passed on by its customer at the point of issuance of the cheque. Positive Pay System is getting completed from January 01, 2021.

How it runs: All one wants to do is share the aspects of the issued cheque like Cheque Number, Cheque day, Payee name, Account number, Amount, etc along with an image of the face and reverse side of the cheque, before giving it over to the beneficiary.

When the beneficiary presents the cheque for encashment, the cheque features are compared with the details provided to the Bank for Positive Pay. If the level of the details, the cheque is honored. In case of a mismatch in cheque details, the cheque is related to you.

Contactless payments

To increase the adoption of digital payments safely and securely, the RBI has moved to enhance the limit for contactless card transactions from Rs 2,000 to Rs 5,000 from January 1, 2021.

The progress in limits will, however, be the responsibility of the user. On NFC enabled labels, there is no requirement to enter PIN while making transactions at merchant establishments.

E-mandate for recurring actions

The transaction limit on e-mandates for recurring transactions by cards and UPI will be increased from Rs 2,000 to Rs 5,000 from January 1, 2021. The relaxation will assist users in making high ticket recurring payments like utility bills, investments, two-wheeler EMIs, customer durable EMIs, etc. seamlessly. The progress in limits will, however, be the responsibility of the user.

A cardholder desirous of opting for the e-mandate department on a card shall undertake a one-time registration method, with additional factor authentication (AFA) validation by the issuer. An e-mandate on the card for recurring events shall be registered only after thriving AFA validation, in addition to the normal process needed by the issuer. This facility will now also be possible for UPI users.

Digital payment disputes

The RBI has declared the introduction of an Online Dispute Resolution (ODR) system for determining customer disputes and complaints about digital payments, using a system-driven and rule-based tool with zero or minimal manual interference. The authorized entities have been required to implement an ODR system for words and grievances related to failed transactions in their respective pay systems by January 1, 2021.

  1. Standard term life assurance plan

Buying a term insurance plan will display much simpler than before. IRDAI has delivered all life insurers to mandatorily offer Standard Individual Term Life Insurance Product to be named ‘Saral Jeevan Bima’with effect from 1st January, 2021. The Standard term life insurance program will have simple features and standard terms and provisions. The minimum sum secured is kept at Rs 5 lakh while the maximum cover can be for Rs 25 lakh. Anyone between 18 and 65 years of age can purchase the plan.

Multi-cap mutual fund plan

There has been a repair in the Multi-Cap Funds and they had to comply with brand-new guidelines by January 2021. SEBI had decided to somewhat change the scheme characteristics of Multi-Cap Fund. As per the earlier categorisation, in a Multi-Cap Fund, the Least investment in equity & equity related tools is to be 65% of total assets investing across large-cap, mid-cap, small-cap funds.

Now, the least allocation in large-mid-small cap companies has been defined. The Smallest investment in equity & equity related instruments – 75% of entire assets in the following manner:

  • The minimum investment in equity & equity related tools of large-cap companies – 25% of total assets
  • The minimum investment in equity & equity related tools of mid-cap companies – 25% of total assets
  • The minimum investment in equity & equity related tools of small-cap companies – 25% of total assets

New Riskometer tool

Selection of mutual fund scheme based on one’s risk profile also displays easier from the new year. Till now, the Riskometer of a mutual fund scheme described five risk areas – Low, Moderately Low, Moderate, Moderately High and High Risk.

Going ahead, there will be a new risk area for the MF schemes as SEBI has decided to preface, ‘Very High Risk’ as the sixth risk aspect for the MF schemes. SEBI has notified that this new mutual fund rule shall be in force with effect from January 1, 2021, to all the present schemes and all schemes to be started on or hereafter.