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Update: RBI extends deadline for compliance with rules on failed transactions

payments, digital payments

The Reserve Bank of India (RBI) extended the deadline for compliance with several rules and regulations concerning payment services. The central bank has extended the date for compliance with its common framework on reversing failed digital payment transactions from December last year to September 30, 2021.

“Keeping in view the resurgence of the COVID-19 pandemic and the representations received from various bank and non-bank entities, it has been decided to extend the timeline prescribed for compliance in respect of a few areas,” the RBI said in a notification. In September 2019, the RBI issued guidelines on the harmonisation of TAT and customer compensation for failed transactions using authorised Payment Systems, through which it created a common framework for all payments companies to follow when it comes to reversing failed digital payment transactions.

The RBI also said that the prescribed TAT is the “outer limit for resolution of failed transactions” and that banks and other payments operators/entities should aim to implement a system for quicker resolution of such failed transactions. While these rules came into force on October 15, 2019, the original date for compliance was March 24, 2020. But in June last year the RBI extended the deadline to December 31, 2020.

Payment companies now have until September this year to implement this framework within their systems to automate-reverse payments to customers, in case of transaction failures or wrongful debits, within the timeline prescribed.

Timeline for auto-reversal

In case funds are debited from a customers’ account but the transaction gets stuck or negated in transition through various payment entities and networks, the RBI has mandated all payment system operators to implement a common timeline to auto-reverse the ‘wrongful debit.

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“It has been observed that a large number of customer complaints emanate on account of unsuccessful or ‘failed’ transactions. Failure could be on account of various factors not directly attributable to the customer such as disruption of communication links, non-availability of cash in ATMs, time-out of sessions, non-credit to beneficiary’s account due to various causes, etc. Rectification / Compensation paid to the customer for these ‘failed’ transactions is not uniform,” the RBI said at the time. Adding that the framework for TAT for failed transactions and compensation is aimed at bolstering customer confidence and bring in uniformity in the processing of the failed transactions.

“A ‘failed transaction’ is a transaction which has not been fully completed due to any reason not attributable to the customer such as failure in communication links, non-availability of cash in an ATM, time-out of sessions, etc. Failed transactions shall also include the credits which could not be effected to the beneficiary account on account of lack of full information or lack of proper information and delay in initiating a reversal transaction,” it said.

As per the RBI’s framework, banks and non-bank payment operators need to reverse a failed transaction according to the following timeline:

  • ATM: T*+5 days
  • Card to Card: T+1 day
  • Card at PoS or online: T+5 days
  • Immediate Payment System: T+1
  • Unified Payments Interface
    • In case of beneficiary account not being credited: T+1
    • In case of no transaction confirmation at the merchant location, the acquirer has to initiate a ‘Credit Adjustment’: T+5 days
  • Aadhaar Enabled Payment System: T+1
  • National Automated Clearing House
    • Delay in creditng beneficiary’s account: T+1
    • Account debited despite revocation of debit mandate: T+1
  • Pre-Paid Instruments (Cards/Wallets)
    • Off-Us: Follows card, UPI and IMPS guideline
    • On-Us: T+1

*T = Date of transaction

The RBI has mandated that banks and non-bank payment players have to pay the customer Rs 100 everyday if the transaction is not reversed within the set timeline. It has changed the criteria for payment companies to compensate customers for a delay in reversing the failed transactions to Rs 100 per calendar day to Rs 100 per working day. The RBI had earlier clarified this change in its June 4, 2020 notification.

Other extensions

  • The RBI has allowed existing non-bank payment aggregators to apply for authorisation till September 30 this year — an extension from the earlier deadline of June 30
  • Authorised Payment System Operators (PSOs) can furnish their System Audit Report conducted by CERT-IN empanelled auditors by September 30, 2021 as opposed to the current deadline of May 31. As per the RBI’s regulations, payment operators need to furnish the system audit report to the regulator on an annual basis within two months of the close of their respective financial year.
  • The RBI has also allowed non-bank PPI issuers to meet the minimum positive net-worth requirement of Rs 15 crore by September 31, 2021. At present, PPI issuers need to show the regulator they have a minimum net worth of Rs 15 crore, based on their financial position as of March 31, 2021.

Also Read

*Update (May 25, 2021 12:56 pm). An earlier version of this article said that the original date for compliance was October 15, 2019, whereas it was March 24, 2020. The error is regretted. (Originally Published on May 24, 2021 at 6:48 pm)

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