Customers of seven banks can now issue standing instructions for recurring payments online, through the National Payment Corporation of India’s (NPCI) National Automated Clearing House (NACH), the Times of India reports. Standing instructions are a way of making an automatic payment of a fixed amount to a loan, bill or credit card at the same time every week or month. The process has traditionally involved paper forms and cheques under the RBI’s electronic clearing services (ECS) and the newer NACH. Making the process paperless will speed it up, reduce handling costs and prevent problems such as signature mismatches. The seven banks are Yes Bank, Kotak Mahindra Bank, IDFC Bank, Axis Bank, Central Bank, Bank of Baroda and Punjab National Bank. All seven allow customers to provide standing instructions through netbanking, and Kotak Mahindra allows this through debit cards as well. 

Problems with eSigned mandates

Banks did provide a paperless eSign facility for mandates briefly, staring in May 2017, but the NPCI discontinued this shortly after the Supreme Court restricted the use of Aadhaar last September. However, eSigned mandates had other issues as well. In March 2018, Moneycontrol reported an incident in which a Delhi-based coaching centre, while ostensibly performing eKYC, in reality acquired an eSigned mandate for a loan from a digital lender to the individual, disbursed directly to the coaching centre. The fraud could be pulled off because of the lack of a perceptible difference between verification of identity (Aadhaar authentication), approval to share KYC data (Aadhaar eKYC), authorisation (Aadhaar eSign), and financial authorisation (Aadhaar eSign-based mandates). The individual was not notified of the context for Aadhaar authentication, and a single OTP could do any of the above, thereby putting every Aadhaar holder at deep risk.

Recurring payments through UPI 2.0 still awaited

In March, Indian lenders had asked the RBI to allow customers with UPI 2.0-enabled devices to use the recurring payments feature for such things as the monthly instalments on their loans, insurance premiums, and mutual fund investments. UPI is a mobile platform that facilitates instant fund transfer between two bank accounts without requiring details of the beneficiary’s bank account. It also allows users to link multiple bank accounts to a single mobile banking app.

When the NPCI launched the upgraded version of the Unified Payments Interface (UPI), dubbed UPI 2.0, in August 2018, the absence of recurring payments had disappointed companies. The RBI said then that the feature was omitted because it was open to misuse. After UPI 2.0 was launched, the Indian Banks’ Association, with representatives from major public sector and private sector banks, sent a detailed proposal to the regulator seeking permission for regulated financial entities to use recurring payments for loans, premiums and so on.