The Important New Changes Related To Money Matters You Must Know

October 4, 2021 Mutual Fund

We do multiple financial operations that involve following different processes; and over time, these processes may change or new rules are implemented. You need to be aware of any such process changes to have a better understanding and successfully complete your financial requirements. The regulatory authorities Reserve Bank of India (RBI) and Security Exchange Board of India (SEBI) are the two major entities that implement new rules and makes alterations in the existing rules/process related to your banking or investment and other financial transactions.

Consequently, there are few important changes related to money matters that may affect your financial functioning and these changes will come into effect from October 01, 2021. There are some key regulatory and operational changes that will affect your financial life and these changes are related to pension, bank chequebooks, auto debit facility and mutual fund investments.

Here’s a look at the few important personal finance related changes that comes into effect from October 1, 2021:

1. Auto Debit Facility

The Reserve Bank of India (RBI) recently mandated that the facility for auto-debit from your credit card/debit card undergo some adjustments. According to the new rule, the banks are required to carry out an additional factor authentication (AFA), which means that the amount cannot be deducted from your debit/credit cards without getting the approval of the subscriber.

All the recurring payments made using third-party applications will be preceded by a notification to the customer at least one day prior. The RBI has taken this step to safeguard the customer, you, from preying fraudsters by securing the payment process.

Many of you may have opted for the auto-debit facility, to make recurring monthly or yearly payments through your debit or credit cards. So now, your monthly/yearly auto-debit payments related utility bills and monthly subscriptions such as Netflix, Amazon Prime, etc. will not be deducted without your authenticated approval. You will receive a notification from your respective banks 24 hours before the payment. Once you approve and authenticate the transaction, the money will be debited from your account and you will receive an SMS or E-mail.

RBI has directed all the banks to make certain adjustments that will include the AFA facility for its customers. However, do note that AFA will not be applicable on all transactions it has set certain limits, consecutive transaction up to Rs 5000 will be processed seamlessly without AFA. Whereas transactions above Rs 5000 will be mandated through the AFA and require chipping OTP every time.

This will elevate the payment security to new levels, it will put more power in hands of customers as they can control their payments. If you use a third-party app to auto-debit your payments, you need to re-register and consult with your respective bank regarding AFA as soon as possible.

Also, ensure that your valid mobile number is updated and linked with the bank and your debit/credit cards as the registered number will receive the AFA notification.

2. Pension life certificates

According to the new regulations, the laws surrounding digital pension life certificates will change effective from October 1, 2021. Pensioners, who are aged 80 and above, will have the option to submit their digital life certificates at “Jeevan Pramaan Centres” of respective head post offices in the country.

What is a Pension life certificate? – A life certificate helps to ensure the credit of pension without any break as it may be the only source of income for many retired individuals. It enables the pensioner to generate a digital life certificate using a software application and the Digital Life Certificate (DLC) can be accessed by the pensioner & the Pension Disbursing Agency as and when required.

The Life Certificate can be submitted either by the traditional method in which the pensioners are required to visit the bank branch disbursing their pension. This process, however, is considered time consuming.  In order to make this process more convenient, anyone above the age of 80 is eligible and such people who have retired will be able to submit their digital life certificate at the ‘Jeevan Pramaan Centres’ of respective post offices across the country.

Do note, the deadline for submission of these certificates is November 30, 2021, the Indian Postal Department has been directed to reactivate IDs of these “Jeevan Pramaan Centres” in case IDs were closed.

The government has also provided a platform that enables pensioners to submit the certificate online and avoid physical visit. In addition, some banks have initiated offering submission of life certificate via their doorstep banking services.

3. Bank cheque book rule change

The old chequebooks and MICR codes of the three banks will become invalid at the beginning of the next month, i.e. October 1, 2021. The old cheque books and MICR codes of three (The Oriental Bank of Commerce or OBC, United Bank of India and Allahabad Bank) will no longer be valid.

Oriental Bank of Commerce and United Bank which merged with the Punjab National Bank (PNB), informed customers that old chequebooks and pre-existing MICR and IFS (Indian Financial System) codes would be halted if not updated yet. Similarly, Allahabad Bank has been merged with Indian Bank.

The banks used Twitter as a platform to announce the changes, which came as a result of their recent mergers. Also, the customers of Allahabad Bank, Oriental Bank of Commerce (OBC), and United Bank of India are advised to apply for a new chequebook, as their existing chequebook will become invalid from October 1, 2021. You can apply for a new chequebook through net or mobile banking, ATM or via your bank branch to avoid any transactional inconvenience.

4. Investment rules change at fund houses

The rules for mutual fund investments will witness a change as per the new rules brought by the Securities and Exchange Board of India (SEBI). Intending to protect the interests of the mutual fund investors, SEBI has enacted a new rule applicable to junior workers working for Asset under Management Company, also known as Mutual Fund House.

With effect from October 1, 2021, junior employees of asset under management businesses will be required to invest 10% of their gross salary in units of that mutual fund. You will need to invest a certain amount as mandated by SEBI into mutual funds of the mutual fund house you are working with. This ‘skin-in-the-game’ rules will be applied in a phased manner for junior employees of fund houses. For these regulations, SEBI has defined junior employees as those below 35 years of age, and are not heads of any departments.

As per the new rule, if you are a working employee under any asset management company, you are required to invest up to 10% of your gross salary in units of that mutual fund. Gradually, it is estimated that this will be increased to 15% from October 1, 2022 and it will be raised to 20% of the compensation amount from October 1, 2023. There will be a lock-in period for this investment.

In case, any employees already hold units of mutual funds they manage, then they can be used to offset the impact on salary under certain conditions. This relaxation is not applicable to the CEO or fund manager. For such employees, 20 percent of their salaries will be invested in mutual fund units from October 1, 2021, and be locked in for three years.

Therefore, these are the 4 important changes related to banking, investments, and pension that you must be aware of, as it may affect your financial life.

In my opinion, it is always prudent to be financially aware and equipped with financial knowledge. Financial literacy assists you in having a better control of your finances and updated with new norms related to any regulatory or operational financial changes.

This article first appeared on PersonalFN here