Reserve Bank of India : Representation on the implementation of the directive on processing of e-mandate on cards for recurring transactions

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Reserve Bank of India : Representation on the implementation of the directive on processing of e-mandate on cards for recurring transactions

Apurva Singh

@apurvaa

August 26, 2021

Public Policy

173

NASSCOM made a representation to the Reserve Bank of India (RBI) to address industry’s concerns regarding the implementation of the directive on processing of e-mandate on cards for recurring transactions (e-Mandate Directive) by September 30, 2021. While the RBI’s circular impacts the e-commerce industry, the burden of compliance with the e-mandate primarily falls on the issuer banks.

Our submission makes the following suggestions:

Domestic transactions

All issuing banks should be required to participate in the recurring framework and complete integration with the platform in a timely manner.
- RBI should continuously monitor the implementation progress by banks to direct them towards timely compliance by on or before September 2021 or consider providing an extension.
- Checking the state to readiness of banks may be done through Indian Banks’ Association (IBA) or other associations, as RBI deems appropriate.
- RBI should consider publishing a periodic update on the compliance status of the banks.
Merchants should be permitted to send such pre-debit notifications in compliance with the E-mandate conditions. Pre-debit notifications are an important step to protect customers from unauthorised charges and facilitate customer choice. However, issuers do not have complete visibility into the billing cycle for recurring payments.
- Considering the practical challenges to this issue, merchants should be permitted to send such pre-debit notifications in compliance with the E-mandate Conditions.
- Issuing banks may continue to work with merchants to oversee compliance with the E-mandate Conditions and retain flexibility in approving merchants who may be allowed to exclusively send pre-debit notifications based on their risk assessment and compliance.
- Additionally, to safeguard customers from any unauthorised charges, we suggest that the liability of charges incurred by a customer due to non-compliance by the merchant with the requirement to send pre-debit notifications, should be borne by the merchant.
Since there is only a months’ time to meet RBI’s deadline on recurring e-mandates, the industry needs guidance from RBI on future course of action. We request RBI to publish a notification or update on this issue once the readiness of banks have been assessed, for other stakeholders to get clarity on their responsibilities towards meeting the deadline. RBI may also consider conducting an industry consultation to understand the issues of the stakeholders and address their concerns.
Currently, there is one TSP for recurring infrastructure. In case of an outage of the TSP platform, recurring transactions for all issuing banks available on such a platform will be interrupted. There are also chances of concentration risk, limited competition, and limited innovation. Therefore, it is crucial that the overall framework provides opportunity to the service providers to build multiple solutions possibly in an interoperable manner.

Cross-border transactions

The application of the circular on the cross-border transaction has created operational challenges to comply with. These transactions are with overseas merchants and in most of the cases acquired by the acquirers overseas and do not necessarily have any operations in India. Therefore, the technical requirements to comply with the RBI circular by the overseas merchants and acquirers poses a practical challenge.

In this regard, we have suggested the following:

Exclude the cross-border recurring transaction from the ambit of the circular.
Consider a reasonable timeline for foreign merchants and foreign banks to account for the fact that various stakeholders would be required to make operational changes to comply. The prescribed timelines may consider a sufficient, additional time frame of at least 24 months following the issuer banks’ implementation(s) of their solutions for the e-mandate, to ensure that merchants have sufficient time to adapt.
Clarification on compliance for foreign banks: NASSCOM suggested that if the RBI intends to include the AFA requirement for foreign acquiring banks, it should clarify the manner in which foreign banks should comply with the requirements including providing technical guidance and standards concerning technical solutions enabling the e-mandate and the AFA.

Background

On March 31, 2021, RBI extended the timeline of processing of recurring online transactions by six months i.e. up to September 30, 2021. The move was aimed to ensure that the customers do not face any inconvenience. A summary of the e-Mandate Directive, details of the extension and its impact is available here.

For more information, write to apurva@nasscom.in or policy@nasscom.in.

Reserve Bank of India E-mandate on cards for recurring transactions

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Apurva Singh

Senior Policy Associate

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