New debit and credit card rule for OTP requirement comes into effect

The Reserve Bank of India has authorized the increase in the limit of electronic money orders/standing instructions on credit/debit cards and prepaid payment instruments (PPI) for recurring transactions to 15,000, from 5,000, effective immediately. Prior to January 1, 2021, the limit was 2,000. “Upon a review of the implementation of the electronic mandate framework and the protection offered to customers, it was decided to increase the limit of 5,000 to 15,000 per transaction and will be effective immediately,” the RBI said in a notification on June 16.

“Requests have been received from stakeholders to increase the limit in the framework to facilitate higher value payments like subscriptions, insurance premiums, education fees, etc.,” the governor said recently. of the RBI, Shaktikanta Das.

“To further increase customer convenience and take advantage of the benefits available within the framework, it is proposed to increase the limit of 5,000 to 15,000 per recurring payment,” he added.

Under the current framework, processing recurring payments based on an electronic mandate on cards requires an additional authentication factor (AFA) during registration, by sending a pre-debit notification. Subsequent recurring transactions should be executed without an additional authentication factor for convenience.

According to RBI, major banks are providing the facility and transaction volumes are seeing good traction and so far over 6.25 crore money orders have been registered under this framework including for over 3,400 international merchants.

Increasing the limit of electronic money orders on cards for recurring payments from Rs. 5,000 to 15,000 is a welcome move because not only will consumers be able to set mandates for multiple payment categories, but it will also include more players from the insurance, education and lending industries, said Ramesh Narasimhan, CEO of Worldline India.

How to register for recurring transactions based on an electronic mandate:

A credit/debit cardholder opting for the card-based e-money feature will need to undertake a one-time registration process, with an additional authentication validation factor from the issuer.

A credit or debit card e-money order for recurring transactions will only be registered after passing the additional authentication factor or AFA validation, in addition to the normal process required by the issuer, according to RBI

The registration will only be completed after the issuer has obtained all the required information, including the validity period of the electronic mandate and other requirements. The possibility of subsequently modifying the period of validity of the electronic mandate, if necessary, must also be provided for.

During the registration process, the cardholder will have the option to provide the electronic mandate either for a predefined fixed value of recurring transaction or for a variable value of recurring transaction.

Any modification of the existing e-mandate must be subject to AFA validation by the issuer.

As a risk mitigation and customer convenience measure, the issuer must send a pre-transaction notification to the cardholder, at least 24 hours before the actual charge/debit on the card.

When registering the e-mandate on the card, the cardholder will have the possibility to choose a mode among the available options (SMS, e-mail, etc.) to receive the pre-transaction notification from the issuer . The ability to change this method of receiving pre-transaction notification must also be provided to the cardholder.

The Issuer will provide the Cardholder with an online option to withdraw any e-Mandate at any time, after which no further recurring transactions will be permitted for the withdrawn e-Mandate.

To subscribe to Mint Bulletins

* Enter a valid email

* Thank you for subscribing to our newsletter.