Big Blow To Visa, MasterCard: Credit Cards Can Now Be Linked With Credit Card | Recurring Payment Rules Hiked To Rs 15,000

Today, the Reserve Bank of India (RBI) has hiked the limit for e-mandates for recurring payments such as subscriptions, fees, EMIs, etc to Rs 15,000 from Rs 5,000.

For Customer Convenience

While sharing  the outcome of the MPC meeting, RBI governor Shaktikanta Das said, “To further facilitate recurring payments like subscriptions, insurance premium, education fees of larger value under the framework, the limit is being enhanced from Rs. 5000 to Rs. 15,000 per transaction,”.

Further adding, “This will further leverage the benefits available under the framework and augment customer convenience,”.

In order to curb soaring inflation, RBI has hiked the repo rate by 50 basis points, the second such increase in as many months.

Disruption In Recurring Payments

Basically, RBI’s new recurring payment guidelines starting October 2021 caused widespread disruption in recurring payments.

As several banks were not prepared for the new mandates and customers were unaware of how the guidelines work.

In simple words, RBI’s new guidelines were aimed at empowering customers to take charge of their own recurring payments.

This would also ensure the protection against unrequired recurring payments being set up on their cards.

Because of this move, the customers had to re-authenticate these standing instructions for transactions up to Rs 5,000. 

One the two-factor authentication is done the customers would be charged and an e-mandate would be set up for subsequent payments. 

As part of this mandate for recurring payments above Rs 5,000, the customers have to give their consent and go through a two-factor authentication process for every payment.

After the deadline, customers, banks and subscription-based companies alike saw massive disruption within the first month.

But, once the consumers set up their fresh mandates, normalcy returned for a few.

If we look for the long term, these norms are expected to make the recurring payments model safer and more viable. 

However, during the first few months of implementation, the norms led to revenue losses for small startups.

Credit Cards Linking With UPI

In another development, the Reserve Bank of India (RBI) today said that credit cards too will be allowed to be linked to the UPI accounts giving a major shift in how the Unified Payments Interface (UPI) functions.

Further, this will be implemented with the indigenous RuPay credit cards first as it is being allowed to be linked, followed by other card networks such as Visa and Mastercard.

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