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RBI to allow e-mandates on card payments from September 1

The RBI has notified that now it will allow processing of e-mandates on cards from September 1, 2019. Thus the users can now pay up to Rs 2000 without undergoing two-factor authentication process. The new rule will be applicable for payments via debit, credit, prepaid payment instruments (PPIs) and wallets.

In its circular, the central bank also said that it has been receiving requests from industry stakeholders to allow processing of e-mandate on cards for recurring transactions with ‘Additional Factor of Authentication’ (AFA) during e-mandate registration and first transaction. It also mentioned that the rules may be reviewed in future and be extended to include other digital modes of payments.

E-mandate allows banks, financial institutions to automatically debit recurring payments

The E-mandate facility helps the users in recurring payment process after it allows its bank to automatically deduct the required amount without their intervention.

According to the RBI circular, a cardholder will have to “undertake a one-time registration process, with AFA validation by the issuer” if they wish to opt for the services. According to RBI, e-mandate on a card for recurring transactions:

  • will be registered only after a complete AFA validation along with the normal process required by the issuer.
  • will be registered only after all required information including the validity period of the e-mandate and other audit trail related requirements is obtained by the bank.

Apart from this, the circular also lays out that:

  • The issuer will also have to provide for modification of the validity period of the e-mandate at a later stage
  • During the registration process, the user can opt for an e-mandate for either a pre-specified fixed value or a variable value of the recurring transaction
  • Modifications in the existing e-mandate shall include AFA validation by the issuer

The RBI clarified that the users will get a pre-transaction notification 24 hours before the transaction following which the user may choose to cancel the payment if needed. The bank or the financial institution will also send post-transaction notifications to the user. Additionally, the bank or financial institution will have to provide the cardholder with an online facility to withdraw an e-mandate, and stop the recurring transactions.

Rs 2000 cap is low: PCI

In a statement, the Payment Council of India said while it welcomes, RBI’s move, PCI chairman Vishwas Patel said that the cap of Rs. 2,000 is low for many subscription/ bill payments/ education fees etc. “Further, electricity bills from commercial shops/ offices/ 3bhk plus residences in metro cities are in excess of Rs. 2000 per month and will not have the facility of automatic recurring payments due to this cap. Hopefully, RBI will give it a re-look and increase the cap in the near future.”

He said including UPI as a payment option would have been appreciated. “UPI 2.0 is a non-starter because RBI has blocked its biggest feature recurring billing,” he added. 

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