What Is e-Mandate for Recurring Payments and How Does It Work?

What are recurring payments?

A recurring payment is a transaction that repeats multiple times on a specific date and is charged to the customer periodically. The recurring payment facilities offered by bank accounts, debit and credit cards, Unified Payment Interface (UPI), and Wallets or Prepaid Payment Instruments (PPI) has now become a part of our life. It helps us automatically pay our bills by a chosen payment method with a single authorisation done at the initial registration stage. The best example is how your Netflix subscription gets automatically renewed every month if it is linked to your credit card with an auto-payment instruction. Other examples can be any automatic recurring payments, such as OTT media services, SaaS, financial services like loan repayment and insurance premium payments, utility bills like electricity bills, telephone bills, or recharge of prepaid phone numbers done through the above-mentioned different payment methods.

What is an e-mandate?

E-mandate is a digital payment service offered by the Reserve Bank of India (RBI) and the National Payments Corporation of India (NPCI) that serves as an underlying infrastructure for businesses in India to collect recurring payments without any human intervention. It allows you to provide standing instructions to your bank to debit a specific amount from your bank account automatically. E-mandate ensures timely payouts like loan EMIs, credit card payments, subscription fees, insurance premiums, SIPs, etc., without any delays or defaults. This helps in managing scheduled payments and avoiding any penalty for missed or delayed payments. The RBI has increased the e-mandate limit for recurring payments to Rs 15,000 from earlier Rs 5,000. However, in case you have insufficient funds in your bank account at the time of auto-debit, the bank may charge you for the failed transaction depending upon the terms and conditions of the bank.

So, once the customer has given an e-mandate to the business, the specific amount will be transferred automatically from the customer's bank account to the business. This process makes recurring payments convenient to customers as well as businesses. While businesses have been collecting these payments offline, the introduction of e-mandate has made the entire process more convenient for customers and businesses.

Electronic Clearing System (ECS) and National Automated Clearing House (NACH) are India's most popular e-mandate platforms. ECS is an offline e-mandate process that requires a lot of paperwork, including filing and document verification. Whereas NACH is a completely online process that requires minimal paperwork. The convenience of a paperless and hassle-free process is growing the adoption of NACH.

What are the benefits of e-mandate?

1. Helps businesses increase customer retention:

When customers opt for an e-mandate and the businesses auto-debit their bank accounts to easily manage the payment cycles, it increases the chances of customer loyalty and customer retention. On the other hand, customers get uninterrupted service from businesses.

Join Now: PersonalFN is now on Telegram. Join FREE Today to get 'Daily Wealth Letter' and Exclusive Updates on Mutual Funds

2. Ensures continuous cash flow:

The e-mandate allows auto-debit to customers' bank accounts, so the customers do not have to login into their accounts or provide any bank details for recurring payments. The automatic debit from the customers' accounts ensures continuous cash inflow to the business as e-mandate reduces the chances of friction in payment.

3. Reduced administrative cost:

Since e-mandate is an automated payment facility, the administrative cost of the businesses is substantially reduced compared to what it was with manual recurring payments.

4. Hassle-free process:

The entire e-mandate process is quite easy, and businesses only need customers' bank account or debit/credit card details to enrol them for recurring payments. This makes the payment of recurring transactions completely hassle-free.

5. Offers flexibility to the customer:

The customers can choose the recurring payment frequency as per the product/service they have chosen. Moreover, customers can modify the facility when they need Additional Factor Authentication. For example, customers can simply visit the business's official website and stop or restart the recurring payment.

6. Ensures automatic reconciliation:

While manual transactions need to be reconciled manually after a specific period, the e-mandate process allows periodic automatic reconciliation. This helps businesses save a considerable amount of time and cost.

7. Ensures transparency and security of the transactions:

Since the entire e-mandate process is online and guided by the RBI regulations, it is completely transparent, and there are no hidden fees or charges. Besides, businesses and financial institutions take necessary precautions to secure financial transactions.

What is the eligibility for the e-mandate?

To use the e-mandate facility as a customer, you should fulfil the following eligibility criteria:

1. You should have a bank account with a bank that provides the e-mandate facility

2. You should have an Aadhar Card

3. Your mobile number should be linked to your bank account and Aadhar Card

To conclude:

E-mandate is the most convenient way for businesses and customers to pay for the products or services that require recurring payments. The facility ensures the customers get uninterrupted access to their chosen products/services and the businesses receive continuous cash inflow without any friction. The RBI timely introduces and/or upgrades the guidelines pertaining to recurring payments to ensure the safety and security of the e-mandate transactions.

Warm Regards,
Ketki Jadhav
Content Writer