New RBI norms may hit 50% recurring payments

Industry looks for relief as new rules kick in today

Industry players across payments, merchants and banking ecosystem fear that

50 to 60 per cent recurring transactions may fail on October 1 as the Reserve Bank of India’s changes on recurring payments kick in. Even as several banks sent out messages to customers announcing the new rules, industry sources indicated that extension of the timeline could prevent a likely disruption in business.

If the RBI does not give an extension, it would take at least three months for the entire payments system to start working smoothly, several company and bank executives told Business Standard.

“India could experience lakhs of transactions getting declined, resulting in a financial mess in the short term as well as impacting the delivery of goods and services,” said one of the executives.

Standing instructions too would be affected, an official pointed out. All existing standing instructions will fail and customers would have to manually make payments, he added. It is not a onetime, short-term issue, according to people in the know.

While banks are scrambling to comply with the guidelines, much of the work has to be done by merchants and card networks. According to HDFC Bank, among merchants, Amazon-prime, Netflix, Max Life Insurance, Google India, Hotstar, Policybazaar, Facebook, and Bajaj Allianz General Insurance are currently live with them for merchant standing instructions on HDFC Bank debit and credit cards. Also, among card companies, only VISA cards are enabled for registering merchant standing instructions as per RBI guidelines.

All existing standing instructions will fail and customers will have to manually make payments, an official said

Merchant standing instructions on Mastercard, Diners, and Rupay would follow.

Industry sources said there would be some failed transactions, impacting customers. New customer SI (standing instructions) registrations could also face delays.

However, some companies are optimistic. Shashank Kumar, chief technology officer and co-founder of fintech unicorn Razorpay, said the RBI guidelines on recurring payments were a step towards making digital payments safe and secure.

To date, recurring payments have largely been mandated on credit cards while debit cards were not as widely used. Kumar said the new guidelines would bring muchneeded regulatory clarity on having debit cards support recurring payments.

As for procedure, a common industry-wide platform has been developed by banks and payments players and most banks have completed the internal development and integration.

“Payu is working with merchants and issuers to make sure that the transfer is hassle- free," said Manas Mishra, chief product officer, Payu. All payment players are at different levels of readiness, Mishra pointed out.

Almost all the top banks including HDFC Bank, Kotak Mahindra Bank, Axis Bank, State Bank of India and ICICI Bank have said they would comply with RBI guidelines.

With inputs from Neha Alawadhi