New NACH rules: What changes for your salary, pension, and EMI
First of the month falling on a holiday? Not an issue — the RBI’s new NACH norms allow you to receive and make payments all 365 days of the year
Salaried people — more importantly, pensioners — tend to worry when the first of a month falls on a holiday or a long weekend. While some employers are kind enough to pay the salaries before the due day in such cases, many choose to do so after the due date.
This, in turn, affects the ability of the salaried person to handle monthly financial commitments such as the house rent, school fees and EMI (equated monthly instalment) payments.
To address this problem, the Reserve Bank of India (RBI) has made some changes to the National Automated Clearing House (NACH) rules, which come into effect from August 1. What are these changes and how are you likely to benefit from them?
What is NACH?
Operated by the National Payments Corporation of India (NPCI), NACH is a web-based bulk payment system that enables one-to-many, or many-to-one, credit transfers. It is designed to handle interbank, high volume, electronic transactions which are repetitive and periodic in nature. These include payments such as dividend, interest, salary and pension, where one organisation sends out money to several individuals/entities simultaneously.
NACH also facilitates the bulk collection of payments from several individuals/entities to one organisation. These include utility bills such as electricity, gas, telephone and water, as well as insurance premiums, mutual fund investments via SIP (systematic investment plan), EMIs such as home loan, vehicle loan, and so on.
What the RBI announced
In June, as part of the Monetary Policy Committee meeting announcements, the RBI said that key banking transactions such as salary, pension and EMI payments can be made 24X7 — regardless of the occurrence of weekends or holidays — starting August 1, 2021.
NACH, which is currently operational only from Monday to Friday, will now work round the clock.
“In order to further enhance customer convenience, and to leverage the 24×7 availability of real-time gross settlement (RTGS), NACH which is currently available on bank working days, is proposed to be made available on all days of the week effective from August 1, 2021,” said RBI Governor Shaktikanta Das.
“NACH has emerged as a popular and prominent mode of direct benefit transfer (DBT) to a large number of beneficiaries,” added Das. “This has helped the transfer of government subsidies during the present COVID in a timely and transparent manner.”
These are the ways it benefits you
Even if the first of a month falls on a weekend or a holiday, you will receive your salary or pension on time.
Any interest (from a bank or other financial institution) or dividend (from a company stock or mutual fund you may have invested in) payment due to you from any organisation will also land on the due date, whether or not it is a working day.
You don’t have to wait for a working day to make your EMI, credit card, SIP or other payments. In the past, you may have had to make a payment in advance when the due date fell on a holiday to avoid late payment fees. Henceforth, that will not be necessary.
In case you are the beneficiary of a government scheme, your DBT will happen on the due date even if it happens to be a holiday; you won’t have to wait for the next working day to receive the money.