Millions of e-mandates or auto-debits set up by customers for paying utility bills and subscriptions could fail from 1 April 2021, with many banks not upgrading their capacities, warns Internet and Mobile Association of India (IAMAI). The Association points to a circular issued by the Reserve Bank of India (RBI) on the processing of e-mandate for recurring transactions using cards, prepaid payment instruments (PPIs) and unified payment interface (UPI). As per the circular, those entities which fail to enable registering, tracking, modification, and withdrawal of e-mandates, will not be allowed to process recurring domestic and cross-border transactions, after 31 March 2021.
IAMAI says its consultations among industry players suggest that most major banks do not have upgraded capacities to comply with RBI’s requirements for processing e-mandates.
According to a report from Economic Times (ET)
, payment volumes worth over Rs2,000 crore across sectors, including card, utility bills, over-the-top (OTT) and media subscriptions along with micro, small and medium enterprises (MSMEs) and corporates, are estimated to be affected 1st April onwards.
The Association feels, as a first step, all banks should be asked to enable such e-mandate-compliant frameworks. After this, other participants like merchants and payment aggregators (PAs) should be asked to build their technical integrations with the scheduled commercial banks (SCBs) and other banks including regional rural banks (RRBs), urban cooperative banks (UCBs), state cooperative banks (StCBs), district central cooperative banks (DCC), payments banks, small finance banks, card payment networks and prepaid payment instrument issuers (PPII).
On the e-mandate for recurring transactions, the central bank had issued two circulars, first on 21 August 2019
and the latest on 4 December 2020
. The second circular was issued to enhance the limit to Rs5,000 from Rs2,000 for relaxation in additional factor of authentication (AFA) while processing e-mandates or standing instructions on card, PPI, and UPI transactions.
In August 2019, RBI had decided to permit processing of e-mandate on cards for recurring transactions (merchant payments) with AFA during e-mandate registration, modification, and revocation, as also for the first transaction, and simple and automatic subsequent successive transactions.
While processing the first transaction in e-mandate-based recurring transaction series, AFA validation is a must. "Subsequent recurring transactions shall be performed only for those cards which have been successfully registered and for which the first transaction was successfully authenticated and authorised. These subsequent transactions may be performed without AFA," RBI had said.
As a risk mitigant and customer facilitation measure, the issuer should send a pre-transaction notification to the cardholder, at least 24 hours prior to the actual charge or debit to the card. While registering e-mandate on the card, PPI and UPI, the customer needs to be given a facility to choose a mode among available options like SMS or email for receiving the pre-transaction notification from the issuer in a clear, unambiguous manner and in an understandable language, RBI says adding, the facility for changing this mode of receiving pre-transaction notification, should also be provided to the customer.
As per the central bank, the pre-transaction notification should at the minimum, inform the customer about the name of the merchant, transaction amount, date and time of debit, reference number of transaction or e-mandate, reason for debit or e-mandate registered by the cardholder.
On receiving such notification, RBI says, the customer should also have the facility to opt out of that particular transaction or the e-mandate. On receipt of intimation of such an opt-out, the issuer shall ensure that the particular transaction and further recurring transactions are not effected, as the case may be, the central bank says.
According to IAMAI, since most major scheduled commercial banks have not upgraded their capacities to comply with RBI circulars, other participants like acquirers and card networks have not been able to follow the obligations under these circulars.
The Association has proposed two alternatives. One is, providing non-bank entities like PAs and merchants with additional time of three to six months after the banks’ implementation deadline. And the second alternative involves ensuring that the issuer banks are compliant with the required infrastructure within the 31 March 2021 deadline and providing an extension of three to six months to the non-bank entities to comply with the RBI circulars.
If the deadline is not extended by RBI, then customers will have to pay utility bills or subscriptions charges by visiting the payment pages of individual merchants.