RBI allows users to set up ‘recurring transaction’ mandates for debit and credit cards
After receiving several requests from the industry, the Reserve Bank of India (RBI) has allowed users to set up electronic mandates for performing recurring transactions on card transactions.
In a recent circular, the RBI stated that this development is applicable for ‘transactions performed using all types of cards – debit, credit, and Prepaid Payment Instruments (PPIs), including digital wallets’.
The directive from the central bank will come into effect from September 1, 2019.
In addition to this, the maximum permissible limit for a transaction under this arrangement shall be Rs 2,000, and no charges shall be levied or recovered from the cardholder for availing the e-mandate facility on cards for recurring transactions.
In a circular, the RBI added,
“Keeping in view the changing payment needs and the requirement to balance the safety and security of card transactions with customer convenience, it has been decided to permit processing of e-mandate on cards for recurring transactions (merchant payments) with AFA (Additional Factor of Authentication) during e-mandate registration, modification and revocation, as also for the first transaction, and simple or automatic subsequent successive transactions."
This means that a cardholder desirous of opting for e-mandate facility on card shall undertake a one-time registration process, with AFA validation by the issuer. An e-mandate on card for recurring transactions shall be registered only after successful AFA validation, in addition to the normal process required by the issuer.
Also, the cardholder is expected to give an option to provide the e-mandate for either a pre-specified fixed value of recurring transaction or for a variable value of the recurring transaction.
The RBI also stated that it has been receiving requests from industry stakeholders for some time to allow processing of e-mandate on cards for recurring transactions.
Starting off with cards, the apex bank in the country will also review this facility and may in due course extend to other digital modes of payments.
This includes digital payment modes including UPI, which has garnered substantial growth, since its launch.
Also, this move from the RBI to allow ‘recurring transactions’ comes as a boost to the country’s digital payment economy and further helps in removing friction from payments, allowing users to pay for subscriptions and services automatically.
Card issuers also have to provide the cardholder an online facility to withdraw any e-mandate at any point of time, following which no further recurring transactions shall be allowed for the withdrawn e-mandate.
The RBI also assured that an appropriate redressal system shall be put in place by the issuer to facilitate the cardholder to lodge grievances. Card networks are also expected to make suitable arrangements to separately identify chargebacks or dispute requests in respect of e-mandate based recurring transactions.
(Edited by Megha Reddy)