- Date : 24/03/2021
- Read: 5 mins
Understanding the big personal finance events of 2020 and their repercussions on your future.
It would be an understatement to say that 2020 was an eventful year. COVID-19 was nothing short of a black swan event. The global pandemic not only changed the way we live, it also compelled us to adapt to the ‘new normal’ lifestyle. The impact of the pandemic on personal finance and overall money management has been quite significant too.
Here's a recap of the top 5 personal finance events that redefined our lives in 2020.
1. Loan moratorium relief from RBI
Apart from essential services, all economic activity ground to a halt during the extended periods of nationwide lockdown after the COVID-19 outbreak in March 2020. Liquidity became an issue as most loan borrowers faced a shortage of funds. The Indian government was under tremendous pressure to provide measures especially for those struggling with liquidity because of this unprecedented situation.
The Reserve Bank of India (RBI) took the opportunity to review processes and the overall situation and announced a period of moratorium on term loans on 27 March 2020. Initially applicable for a period of three months, the loan moratorium period was later extended to six months.
How did it impact consumers?
Loan borrowers reaped direct benefits from the relief measure as it allowed them to defer EMI payments by a period of six months. The central government waived compound interest on the repayment of loans of up to Rs 2 crore as part of the scheme.
Related: What to know while availing of retail loans in the time of the COVID-19 pandemic?
2. Proposal to hike bank deposit insurance
Current RBI guidelines state that the Deposit Insurance and Credit Guarantee Corporation (DICGC) is responsible for insuring deposits with all cooperative and commercial banks in India. This means every depositor is eligible to receive insurance of Rs 1 lakh against the principal and interest amount on the deposits held by the account holder in a specific bank for both current and savings accounts as well as fixed deposits.
If a bank were to declare bankruptcy, the account holder would be eligible to receive only Rs 1 lakh in insurance – that too if the total amount of savings held across accounts was Rs 1 lakh or more. In the 2020-21 budget speech, Union Finance Minister Nirmala Sitharaman proposed a hike in the bank insurance deposit from Rs 1 lakh to Rs 5 lakh per depositor.
How did it impact consumers?
This proved an important piece of amendment to current RBI guidelines as it succeeded in instilling customer confidence, faith, and trust in the Indian banking system. Refocussing on the importance of savings, account holders would be inclined to save and invest through both private sector and public sector banks in India.
Related: 5 Banks that give the best Fixed Deposit rates
3. New credit card and debit card rules
In an attempt to minimise fraud risk, the RBI issued a new set of guidelines to secure debit and credit cards and make transactions more convenient. The updated guidelines will permit cardholders to register their preference to opt in or opt out of services, spend limits, etc. with regard to international transactions, online transactions, and contactless card transactions.
How did it impact consumers?
Consumers will now be able to switch on/off their credit or debit card features – ATM, NFC, POS, or online transaction – thus reducing the possibility of offline and online fraud.
Related: Taking Charge Of Your Credit Score [Premium]
4. Key developments in the Indian insurance industry
COVID-19 is a new entrant to the disease list, so it was not included under the purview of general or health insurance. As the virus continued its rampage, the Insurance Regulatory and Development Authority of India (IRDAI) clarified that hospitalisation due to coronavirus will be acceptable for claim processing or cashless benefits under existing health insurance policies. Deaths due to COVID-19 would be categorised as ‘general deaths’. Therefore, beneficiaries will be able to file claims in accordance with the new guidelines.
How did it impact consumers?
The new IRDAI guidelines on health insurance ensured that policyholders could seek reimbursement on medical costs incurred for COVID-19 treatment. The change in the general life insurance guidelines was also significant as beneficiaries would be able to receive their eligible dues on life insurance policies even in the event of death due to coronavirus.
Related: Insurance cover for COVID-19 in India
5. Mutual funds made more investor-friendly
To encourage public spending, the Securities and Exchange Board of India (SEBI) announced a slew of new rules and regulations, such as a modification in the investment mandate of multi-cap funds and the introduction of a flexicap category. This was followed by tightening inter-scheme transfer norms, changing NAV calculation, and introducing new levels of risk assessment for mutual fund investments.
How did it impact consumers?
The objective of these guidelines was to inculcate in people the habit of saving money through investments in mutual funds. Making mutual funds more transparent and investor-friendly would naturally make them more attractive as an investment destination for general consumers.
Related: The effect of COVID-19 on your mutual fund investments
Last words
In this COVID era, the RBI, in collaboration with the central and local government, have joined hands to introduce measures to keep the economy moving in the right direction. Increased government spending on relief measures is the first of many steps to drive the world of personal finance in a more positive direction. Look at these key highlights of Budget 2020.
It would be an understatement to say that 2020 was an eventful year. COVID-19 was nothing short of a black swan event. The global pandemic not only changed the way we live, it also compelled us to adapt to the ‘new normal’ lifestyle. The impact of the pandemic on personal finance and overall money management has been quite significant too.
Here's a recap of the top 5 personal finance events that redefined our lives in 2020.
1. Loan moratorium relief from RBI
Apart from essential services, all economic activity ground to a halt during the extended periods of nationwide lockdown after the COVID-19 outbreak in March 2020. Liquidity became an issue as most loan borrowers faced a shortage of funds. The Indian government was under tremendous pressure to provide measures especially for those struggling with liquidity because of this unprecedented situation.
The Reserve Bank of India (RBI) took the opportunity to review processes and the overall situation and announced a period of moratorium on term loans on 27 March 2020. Initially applicable for a period of three months, the loan moratorium period was later extended to six months.
How did it impact consumers?
Loan borrowers reaped direct benefits from the relief measure as it allowed them to defer EMI payments by a period of six months. The central government waived compound interest on the repayment of loans of up to Rs 2 crore as part of the scheme.
Related: What to know while availing of retail loans in the time of the COVID-19 pandemic?
2. Proposal to hike bank deposit insurance
Current RBI guidelines state that the Deposit Insurance and Credit Guarantee Corporation (DICGC) is responsible for insuring deposits with all cooperative and commercial banks in India. This means every depositor is eligible to receive insurance of Rs 1 lakh against the principal and interest amount on the deposits held by the account holder in a specific bank for both current and savings accounts as well as fixed deposits.
If a bank were to declare bankruptcy, the account holder would be eligible to receive only Rs 1 lakh in insurance – that too if the total amount of savings held across accounts was Rs 1 lakh or more. In the 2020-21 budget speech, Union Finance Minister Nirmala Sitharaman proposed a hike in the bank insurance deposit from Rs 1 lakh to Rs 5 lakh per depositor.
How did it impact consumers?
This proved an important piece of amendment to current RBI guidelines as it succeeded in instilling customer confidence, faith, and trust in the Indian banking system. Refocussing on the importance of savings, account holders would be inclined to save and invest through both private sector and public sector banks in India.
Related: 5 Banks that give the best Fixed Deposit rates
3. New credit card and debit card rules
In an attempt to minimise fraud risk, the RBI issued a new set of guidelines to secure debit and credit cards and make transactions more convenient. The updated guidelines will permit cardholders to register their preference to opt in or opt out of services, spend limits, etc. with regard to international transactions, online transactions, and contactless card transactions.
How did it impact consumers?
Consumers will now be able to switch on/off their credit or debit card features – ATM, NFC, POS, or online transaction – thus reducing the possibility of offline and online fraud.
Related: Taking Charge Of Your Credit Score [Premium]
4. Key developments in the Indian insurance industry
COVID-19 is a new entrant to the disease list, so it was not included under the purview of general or health insurance. As the virus continued its rampage, the Insurance Regulatory and Development Authority of India (IRDAI) clarified that hospitalisation due to coronavirus will be acceptable for claim processing or cashless benefits under existing health insurance policies. Deaths due to COVID-19 would be categorised as ‘general deaths’. Therefore, beneficiaries will be able to file claims in accordance with the new guidelines.
How did it impact consumers?
The new IRDAI guidelines on health insurance ensured that policyholders could seek reimbursement on medical costs incurred for COVID-19 treatment. The change in the general life insurance guidelines was also significant as beneficiaries would be able to receive their eligible dues on life insurance policies even in the event of death due to coronavirus.
Related: Insurance cover for COVID-19 in India
5. Mutual funds made more investor-friendly
To encourage public spending, the Securities and Exchange Board of India (SEBI) announced a slew of new rules and regulations, such as a modification in the investment mandate of multi-cap funds and the introduction of a flexicap category. This was followed by tightening inter-scheme transfer norms, changing NAV calculation, and introducing new levels of risk assessment for mutual fund investments.
How did it impact consumers?
The objective of these guidelines was to inculcate in people the habit of saving money through investments in mutual funds. Making mutual funds more transparent and investor-friendly would naturally make them more attractive as an investment destination for general consumers.
Related: The effect of COVID-19 on your mutual fund investments
Last words
In this COVID era, the RBI, in collaboration with the central and local government, have joined hands to introduce measures to keep the economy moving in the right direction. Increased government spending on relief measures is the first of many steps to drive the world of personal finance in a more positive direction. Look at these key highlights of Budget 2020.
