The e-mandate for recurring transactions was already effective from October 1, 2021. As per the central bank, banks and other financial institutions are required to ask their customers to provide additional factor authentication (such as OTP or email confirmation) if the auto-debit mandate for the payment is above Rs 5,000. Now, this additional authentication will be required if the e-mandate is for recurring payments exceeding Rs 15,000.
As per the statement on the development and regulatory policies:
The framework on processing of e-mandate based recurring payments, inter-alia, provides for an Additional Factor of Authentication (AFA) during registration, sending a pre-debit notification, subsequent recurring transactions to be executed without AFA, and an easier avenue to withdraw such mandates. Benefits of convenience, safety and security are available to the users. The system also benefits from users’ confidence. Major banks are providing the facility and the transaction volumes are seeing good traction. Till date, over 6.25 crore mandates have been registered under this framework, including for over 3,400 international merchants. Requests have been received from stakeholders to increase the limit under the framework to facilitate payments of larger value like subscriptions, insurance premia, education fee, etc. To further augment customer convenience and leverage the benefits available under the framework, it is proposed to enhance the limit from Rs 5,000 to Rs 15,000 per recurring payment. Necessary instructions will be issued shortly.
Muralidharan Srinivasan, Head of Payments, APMEA Region, FIS – a provider of technology solutions for merchants, banks and capital market firms says, “With pre-paid payment instruments and card transactions gaining traction, the RBI’s move in hiking cap on e-mandate for card recurring payments is a big one. A win-win for both: banks and customers; the proposed enhanced limit from the older Rs. 5000 to Rs. 15,000 will empower customers to stay in control of their own recurring payments. The future transaction experience for them will be hassle-free as recurring payments of high values up to Rs.15,000 will not need an additional factor authentications (e.g. OTPs), after registration. Additionally, e-mandate with the increased cap for recurring payments will become a standard for making many common payments from rent to receivables, various maintenance payments and possibly embed into emerging IOT functions.”
Auto-debit rules from October 2021
From October 1, 2021, under the new additional factor authentication rules, a bank is required to send a notification to the customer at least 24 hours before the auto-debit payment is to be deducted and allow the debit only after the customer has confirmed it.
A pre-transaction notification will be sent via SMS, email etc. The notification will inform the cardholder about the name of the merchant, transaction amount, date/time of debit, reference number of transaction/ e-mandate, reason for debit, i.e., e-mandate registered by the cardholder. The cardholder shall have the facility to opt-out of that particular transaction or e-mandate.
To ensure that auto-debit is made, customer is required to ensure correct mobile number is linked with debit/credit cards so that you can receive a notification for approval.
However, note that there will be no impact of the new rule on your mutual fund SIPs, insurance premiums and other recurring payments if the standing instruction for auto-debit is directly from your bank account.
Payments that are impacted
The new authentication rules impact the customers who have given auto-debit mandates for recurring payments from their debit/credit cards and/or mobile wallets for payments such as subscription to OTT platforms such as Netflix, Amazon Prime, music apps like Spotify, Apple Music, payment of mobile bills, insurance premium, utility bills etc.
The additional factor authentication is required for recurring transactions and not for ‘once-only’ payments. The standing instructions must be for payment from your debit/credit card. For instance, Netflix asks you to provide your debit/credit card details against which subscription fee is debited on the 8th of every month. Similarly, Spotify also ask for your debit/credit cards for payment of premium plan.