RBI Governor Shaktikanta Das (File image: Reuters)
The Reserve Bank of India (RBI) on June 8 hiked the limit for e-mandates for recurring payments such as subscriptions, fees, EMIs, etc to Rs 15,000 from Rs 5,000.
“To further facilitate recurring payments like subscriptions, insurance premium, education fees of larger value under the framework, the limit is being enhanced from Rs. 5000 to Rs. 15,000 per transaction,” RBI governor Shaktikanta Das said as he shared the outcome of the MPC meeting.
“This will further leverage the benefits available under the framework and augment customer convenience,” the governor added.
The Reserve Bank of India hiked the repo rate by 50 basis points, the second such increase in as many months, to curb soaring inflation.
Starting October 2021, RBI’s new recurring payment guidelines caused widespread disruption in recurring payments as multiple banks were not prepared for the new mandates and customers were unaware of how the guidelines work.
Just as a refresher, RBI’s new guidelines were aimed at empowering customers to take charge of their own recurring payments and also to ensure protection against unrequired recurring payments being set up on their cards.
Banks, payment aggregators and card companies had until September 30, 2021 to comply with the norms under which standing instructions for recurring payments such as subscriptions and bill payments stood cancelled.
Customers had to re-authenticate these standing instructions for transactions up to Rs 5,000. After a two-factor authentication, customers would be charged and an e-mandate would be set up for subsequent payments. For recurring payments above Rs 5,000, the customers have to give their consent and go through a two-factor authentication process for every payment.
After the deadline customers, banks and subscription-based companies alike saw massive disruption within the first month and as consumers set up their fresh mandates, normalcy returned for a few.
Moneycontrol had reported that as of March 2022, 40 percent of recurring payment mandates were still failing.
In the long run, these norms are expected to make the recurring payments model safer and more viable. But in the first few months of implementation, the norms led to revenue losses for small startups and even not-for-profit organisations that depended on subscription-based revenues or monthly donations.
For companies, the pain of making payments for subscriptions with international entities continues too. Back-end efforts to make these payments manually to avoid disruptions in day-to-day operations has substantially increased.
Apple for one had said that subscription payments can now only be made through its wallet, while Microsoft extended customer subscriptions by giving free months to avoid losing out on users.
With the limit at Rs 5,000 earlier, companies were moving to to using e-NACH (Electronic National Automated Clearing House), which allows institutions to set up recurring payment mandates of up to Rs 1 lakh per day.