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.
“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.
“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.