INSURANCE
MEASURE: Insurers cannot front load costs
EFFECTIVE DATE: September 1
IMPACT: Policyholders who have to exit early (after the 5th year) will not lose a large chunk of their investment to charges as they did in the past. MEASURE: Three-year lock-in period for all Ulips increased to five years EFFECTIVE DATE: September 1 IMPACT: Insurers cannot sell Ulips as short term plans MEASURE: Minimum cover doubled on all life ulips EFFECTIVE DATE : September 1 IMPACT: Out of every Rs 100 invested in Ulips, a larger component will go towards life insurance. MEASURE: Stipulation of 4.5% guaranteed return on pension and annuity plans EFFECTIVE DATE: September 1 IMPACT: Insurers will direct major part of the investments to safe avenues like government securities, reducing the scope for earning higher return from equityoriented products. MEASURE: All limited premium unit-linked insurance products, other than single premium products, shall have premium paying term of at least 5 years EFFECTIVE DATE: September 1 IMPACT: Insurers cannot position Ulips as mutual funds. Policyholders can look forward to better returns as regular premium payment with the cap on charges will compound returns better.
MUTUAL FUNDS
MEASURE: NFO (new fund offer) subscription period reduced from 30 days to 15 days, except for equity-linked saving schemes).
EFFECTIVE DATE: July 1
IMPACT: The time taken to process applications will decrease. The truncated subscription period will mean that unsuccessful applicants will get their refunds faster.
MEASURE: Ban on distribution of dividends out of unit premium reserve
Already in operation
IMPACT: Earlier, fund houses did not hesitate to dip into fresh funds from new investors for distributing dividends, instead of realised gains. This directive will put an end to this practice.
MEASURE: Extension of Application Supported by Blocked Amount (ASBA) facility to NFO investors.
EFFECTIVE DATE: July 1
IMPACT: Since, under ASBA, application money is debited from the applicant's account only after allotment is finalised, the tiresome task of waiting for refund is eliminated. Also, investors do not stand to lose out on the savings bank interest to be earned during the period.
MEASURE: Valuation of money market and debt securities with maturity of over 91 days, on marked-to-market basis
EFFECTIVE DATE: August 1
IMPACT: Those investing in liquid-plus schemes, which invest in such securities, could see volatility in returns going forward. However, since such schemes predominantly attract institutional investors, retail investors' portfolios may not see a major upheaval.
BANKING
MEASURE:
Implementation of Base Rate – the new benchmark below which banks cannot lend
EFFECTIVE DATE: July 1
IMPACT: The aim is to bring in more transparency in pricing of loans and also, ensure that benefits of any rate cut by banks are passed on to existing home loan borrowers too, and not just new ones, as was typically the case until now. Banks will offer existing home loan borrowers an option to migrate to the new structure. Those who have availed of loans under teaser schemes will see their rates being linked to the lending bank's Base Rate once the fixed-rate period expires. Several banks have announced their Base Rates, ranging from 7.5-8.25%.
MEASURE: Dishonouring of cheques with alterations. The directive is applicable only to cheques cleared under the cheque truncation system (CTS)
EFFECTIVE DATE: July 1
IMPACT: CTS is currently operational only in New Delhi, with the Chennai project set to become functional soon. The RBI has similar plans for Mumbai and Kolkata in future, which means account holders across the country will have to get used to exercising caution while entering details on the cheque leaves or ordering additional cheque books, over a period of time.
