Non-resident Indians (NRIs) will have less chance of being a victim of online frauds after the Reserve Bank of India introduced additional rules on auto debits linked to credit and debit cards in the case of recurring payments.
The e-mandate rules notified by the banking regulator require that all kinds of recurring or repetitive payments, made through credit and debit cards which are of value of INR5,000 (£48.74, $66.27, €57.47) and above, must be preceded by an advance notification from the bank informing the customer about the scheduled payment.
The rules, effective from 1 October 2021, require customers to authenticate such transactions. Banks will seek the customer’s approval for taking forward any such transaction.
E-mandate is a payment service initiated by the Reserve Bank and the National Payments Corporation of India (NPCI) to provide the underlying infrastructure for businesses to collect recurring payments.
The newly established rules stipulate that customers will have to set up an additional factor authentication (AFA) with a one-time registration process for transactions up to INR5,000.
The transaction will not be completed if customers do not approve or reply to the pre-debit notification. If the bank does not receive the customer’s approval, the transactions will not be cancelled.
All for security
For any transaction of more than INR 5,000, banks will send one-time passwords (OTPs) to customers. Those recurring transactions on a customer’s credit or debit card, which do not comply with the rules, will be declined by the banks.
“In short, only those transactions which have the customers’ e-mandate will be successfully executed, as per the central bank’s new guidelines, through which the regulator wants to curb fraud and increase security for customers,” said Benoy Sasi, international lawyer at DIFC Courts, Dubai.
“The RBI measure is prompted by the increasing incidents of online frauds, especially on third party platforms where payment related frauds are common. The e-mandate rule will provide greater control for customers while undertaking recurring payments using credit or debit cards.”
The rules apply only to standing instructions on cards and not standing instructions on accounts given to banks by customers.
But it is not clear from the notification if direct debits for equated monthly instalments (EMIs) for loans and systematic investment plans (SIPs) payments are brought under this rule, though they are recurring in nature.
Keep tabs on payments
Usually, NRIs do not link their banking services in India to their overseas mobile numbers, especially when they continue to operate savings bank accounts in India, though they are required to convert their savings account to NRE (non-resident external) account when they migrate abroad.
As a result, those who have not linked their banking services to their overseas mobile numbers will not be able to receive advance SMS notifications.
DIFC Courts’ Sasi suggests that NRI customers should keep tabs on their upcoming recurring payments in India and make arrangements with their banks for alternative ways to receive advance notifications to avoid disruption of services linked to such payments.
Online subscriptions hit
The e-mandate rules are likely to affect customers who make card-based auto-transactions for bill payments, over the top internet-based content subscriptions, and other online services and subscriptions.
If the subscribers fail to authenticate recurring payments on time there will be disruptions in services, such as television and internet-based subscription services.
Meanwhile, internet merchants including Google, Facebook, and YouTube have notified customers that the rules may lead to disruptions in e-mandate-based recurring payments.
A report said start-ups, merchants and tech platform providers are facing difficulties following the implementation of the framework for processing e-mandates for recurring online card transactions.
The rules are disrupting their customer acquisition process and operations, as these entities have subscription-based services for consuming tech services and internal operations.