The Reserve Bank has decided to extend the timeline for processing recurring online transactions by six months till September 30, 2021. The decision was taken to prevent any inconvenience to the customers, the central bank said.
The RBI's notification pertains to debit or credit card standing instructions given or registered with the third party service providers directly for OTT payments, utility bills, subscriptions without involving the banking platform.
"Any further delay in ensuring complete adherence to the framework beyond the extended timeline will attract stringent supervisory action," the RBI said in a statement.
In August 2019, the RBI had issued a framework for processing of e-mandates on recurring online transactions. Initially applicable to cards and wallets, the framework was extended in January 2020 to cover Unified Payments Interface (UPI) transactions as well.
As per the RBI, the requirement of additional factor of authentication (AFA) has made digital payments in India safe and secure. To boost customer convenience and safety in the use of recurring online payments, the framework mandated use of AFA during registration and first transaction (with relaxation for subsequent transactions up to a limit of Rs 2,000, since enhanced to Rs 5,000), as well as pre-transaction notification, facility to withdraw the mandate, etc.
The main aim of the framework was to protect customers from fraudulent transactions and enhance customer convenience. Based on a request from the Indian Banks' Association (IBA) for an extension of time till March 31, 2021, to enable the banks to complete the migration, the Reserve Bank had advised the stakeholders in December 2020 to migrate to the framework by March 31, 2021.
The RBI said the framework has not been fully implemented even after the extended timeline. "This non-compliance is noted with serious concern and will be dealt with separately," it said, adding that the delay in implementation by some stakeholders has given rise to a situation of possible large-scale customer inconvenience and default.
So far, these recurring payments up to Rs 5,000 were getting debited without getting any additional factor of authentication (via SMS or email) from banks. While banks are already ready for integration, service providers like OTT players or app-based fintech players are still not ready. The reason: e-mandate information has to flow from the service provider to the bank and vice-a-versa.