Caught in middle

This tug of war of sorts between banks and the regulator have left many — over-the-top (OTT) and direct-to-home platforms, media platforms, websites, and everything that depends on auto-renewal of subscriptions — in a quandary.

For the framework to work, banks and payments aggregators will have to make changes in their technology system, data-interchange processes and underlying business contracts, besides how they intimate their customers, says an industry source. Banks, he adds, are not willing to undertake these exercises as they have “little or no returns on investments” from these efforts.

And unless banks finish their system upgradation, payments aggregators cannot start working on theirs, says a source.

Customer inconvenience aside, a disruption to these auto-renewal services is likely to have a “domino effect on large and small businesses”, and will affect the merchant business “while having minimal impact on banks’ services”, the source adds.

One particular technical issue is that the RBI’S framework is silent on migrating customers on the legacy auto-debit system to the new structure. And banks do not want to undertake such a job on their own, risking auditing and compliance issues.

The affected merchants and service providers, instead of approaching the RBI directly, are now in discussions with banks to convince them of the benefits of moving to the new e-mandate platforms.

Realising that their losses would be far greater than those of banks, merchants sent their representations to the Ministry of Electronics and Information Technology, NITI Aayog and the finance ministry to highlight their concerns. Even as these merchants have no direct channel to the RBI, they now plan to send a representation to the regulator with a detailed note on the potential fallout of noncompliance by banks and the impact it would have on consumers and merchants, sources say.

In short, this issue will linger on unless both the banks and the RBI agree on a middle ground — with the regulator offering some flexibility and banks willingness to invest in a new platform.