Additional factor authentication exempted for e-mandates under ₹1 lakh

The Reserve Bank of India has exempted the requirement of Additional Factor of Authentication (AFA) for transactions up to ₹1 lakh for certain categories of payments. These include subscriptions to mutual funds, payment of insurance premiums, and payments of credit card bills.

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“e-Mandates for making payments of recurring nature have become popular among customers. Under this framework, an additional factor of authentication (AFA) is currently required for recurring transactions exceeding ₹15,000. It is now proposed to enhance this limit to ₹1 lakh per transaction for recurring payments, which will further accelerate the usage of e-mandates,” Governor Shaktikanta Das said in his Statement on Developmental and Regulatory Policies, released alongside the monetary policy statement.

The other existing requirements such as pre- and post-transaction notifications, opt-out facility for user, etc. shall continue to apply to these transactions, RBI said, adding that the revised circular will be issued shortly.

“Increasing limits for e-mandates for specific merchant categories is a clear enabler for moving some higher ticket transactions also to a straight through digital mode as opposed to today’s multi-step process. This will reduce friction in these categories and also open up new customer segments for digital financial service providers who can now do these transactions at a lower cost and spending less time and effort,” said Yashwant Lodha, Co-founder, PayNearby.

The framework for processing of e-mandates for recurring transactions was introduced in August 2019 to balance the safety and security of digital transactions with customer convenience. The number of e-mandates registered currently stands at 8.5 crore, processing transactions worth nearly ₹2,800 crore per month.

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“The system has stabilised, but in categories such as subscription to mutual funds, payment of insurance premium and credit card bill payments, where the transaction sizes are more than ₹15,000, a need to enhance the limit has been expressed as adoption has been lagging,” RBI said.

“This is a progressive step for the insurance industry. Currently, insurers face a challenge in reaching the customer every time premium payments are due, leading to lapses in policy renewal. Going forward, insurers can motivate a greater number of customers to sign e-Mandates for payment of recurring insurance premium. It will lead to a higher rate of policy renewals, which will subsequently result in better insurance penetration,” said Anil Kumar Aggarwal, MD and CEO of Shriram General Insurance.