This change in India’s banking rules must be known by non-resident Indians

The RBI, the banking regulator in India, has introduced some new changes to recurring payments for non-resident Indians who hold bank accounts and credit and debit cards in India. Recently, the RBI launched an electronic mandate for auto-debits linked to credit and debit cards.

What is e-mandate?
From October 1, all types of recurring or repetitive payments, especially those made via credit or debit cards and exceeding Rs5,000 in value, will be preceded by an advance notification from the bank, informing the customer about the upcoming payment. An advanced notification for executing recurring payments to customers can be sent by banks so that they can obtain their approval before proceeding with any such transaction, as per the new norms notified by the RBI. As a result, customers must approve auto-debit requests in advance by providing an additional factor authentication (AFA). If the customer does not approve or respond to the pre-debit notification, the transaction will not be completed.

If the customer’s approval is not received, such transactions will not be carried out. A one-time password (OTP) will automatically be sent to customers for any transaction exceeding 5000 in this new system. Recurring transactions on a customer’s credit or debit card that don’t comply with this new rule will now be declined by the bank. Essentially, only those transactions with the customers’ e-mandate will be processed, in accordance with the new guidelines of the central bank.

Protections added
Customers are better protected from online frauds under the new rules, especially on third-party platforms, where it has been reported that payment-related frauds are more likely to occur. With the e-mandate rule, the RBI seeks to give customers greater control over recurring payments using credit or debit cards. For the time being, the new rule applies only to standing instructions given by customers to their banks by way of cards, not by way of accounts. As a result, direct debits for EMIs and payments associated with systematic investment plans (SIPs) are unlikely to be affected.

Customers who make card-based automatic payments for bill payments, OTT [over the top internet-based content] subscriptions, and other online services are likely to be affected by the auto-debit rules. A number of internet merchants, including Google, Facebook, and YouTube, have informed their customers that the new rules may disrupt e-mandate based recurring payments.

E-mandate: pros and cons
Advantages

• Customers are protected from many payment frauds associated with recurring transactions under the new e-mandate rule.
• Customers are given more control by requiring authorization.
• Banks are urged to take greater care when authorizing payments.

Disadvantages

• Subscription services such as television and internet-based subscriptions could be disrupted if recurring payments cannot be authenticated in a timely manner.
• Foreign citizens who do not link their overseas mobile numbers to their banking services will not be able to receive their SMS notifications.
• In order to avoid interruptions of services linked to recurring payments, NRIs will have to closely monitor their upcoming recurring payments in India and make arrangements with their banks to receive notifications on time.