Policy Changes
Change is the only constant it is said. With the evolution of time and maturity of the financial markets, new and innovative policy changes are introduced replacing older ones.
With the phase of high inflation slowly fading away, there have been some new policies introduced to make life easier for the common man. The governing bodies including the Reserve Bank of India, the insurance watchdog Insurance Regulatory and Development Authority (IRDA), as well as stock market regulator SEBI have introduced some new policy decisions that are likely to usher a positive market sentiment as a whole. Lets us take a look at some of the recent policy changes and how they are likely to impact the common man or investor.
- Insurers asked to display unclaimed money on their website: The Insurance Regulatory and Development Authority (IRDA) has issued new guidelines whereby all insurance service providers will have to display details of any unclaimed amount above Rs 1000 on their website. The new policy also directs insurance companies to have a facility where the policyholder (s) or his/ her dependants can check if there is any unclaimed amount due to them is still with the insurer. IRDA has directed insurance companies to make sure that all such information should be updated on a half-yearly basis by January 2015.
Impact: Insurance companies are likely to move away from the cheque payment system to the National Electronic Fund Transfer (NEFT) automatically transferring funds to the account of the policy holder or the nominee when the policy expires. Any unclaimed amount listed on the official website would act like a dark spot on the reputation of the insurance service provider.
New insurance seekers are likely to go in for those service providers who have a minimum default payment track record. Sometimes there can be a number of unclaimed amounts or pending claims with the insurance companies due to technical problem like mismatch of postal address of the policy holder or the nominee. Insurance companies have been guilty of not being proactive in resolving such claims. With the new policy, insurance companies are already pulling up their socks and the sector has witnessed nearly 20% reduction in the amounts lying unclaimed. Customers, who are not traceable on their address or phone number, are also being contacted through the social media by insurance companies making it a consumer friendly policy.
- RBI’s allowance for minors to operate savings accounts: In a new policy, the banking regulator Reserve Bank of India (RBI) has introduced a policy allowing children over 10 years to open and operate their bank accounts independently. While children are free to operate the bank account independently, the policy suggests that parents must monitor the transactions regularly to ensure every penny is spent wisely. The policy is made available for all types of bank accounts including fixed, recurring and savings deposit accounts. While RBI has allowed minors above 10 years to independently open and operate savings bank accounts, the minimum age for such operations has been left for the banks to decide.
Impact: The biggest impact of this decision is the likelihood of children getting real time education on understanding money matters. Parents are often lazy or too busy to teach the children about the importance of finances and the working overview of banks and the financial market. With real banks replacing the piggy bank accounts, children are likely to learn the merits of saving and spending only when necessary. With the banks offering internet banking, ATM, debit cards as well as cheque book facility for the children, they are likely to learn financial management more aptly than ever before.
- IRDA’s allowance on long term insurance covers for 2 wheelers: The Insurance Regulatory and Development Authority (IRDA) has recently introduced a long-term motor third-party insurance policy for two-wheelers with a three-year term. According to IRDA guidelines, the total premium charged for the third-party coverage would be three times the annual third-party premium for two-wheelers as decided by the regulator.
Impact: The new ruling offers a win-win situation for both the insurer as well as the insurance company. While insurance company can get the advantage of collecting a three year premium at one go, the insurer does not have to worry about annual renewal. Many people in the past have been fined due to failure in timely renewal of policy. A three year eligibility period would make sure users would no longer have to worry about annual renewals.
- SEBI’s Approval to REIT: The capital market watchdog SEBI has approved regulations for Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs).The move comes after the finance minister’s budget announcement of the government’s plan to reintroduce REITs in the Indian market to streamline and rejuvenate the realty sector.
Impact: The biggest impact of SEBI’s ruling would be that the real estate companies will receive influx of both domestic and international funding, brining the sluggish realty sector a shot in the arm. Since REITs would be would be listed and traded on stock exchanges, domestic investors can use them as liquid cash whenever required. In the Union budget, Finance Minister Arun Jaitley had announced significant tax incentives for REITs, making it a win-win situation for both investors and real estate companies. While realty companies can attract large capital, investors can hope for good returns through various REIT investments as well as tax rebates.