What is E-Mandate and How it Works?

Do you have to pay recurring bills or subscriptions every month? Do you often forget to make the payments on time or face hassles in doing so? Do you wish there was a way to automate your payments and save your time and money? If you answered yes to any of these questions, then you should know about e-mandate. 

What is E-Mandate?

E-mandate meaning is an electronic mandate. It is a digital payment service that allows businesses to collect recurring customer payments without manual intervention. It is a convenient and secure way to pay for your regular expenses, such as MSME loan repayments, insurance premiums, utility bills, DTH subscriptions, and many more.

This service has many benefits for both businesses and customers. For businesses, it reduces the cost and effort of collecting payments, improves cash flow, and increases customer retention. For customers, it eliminates the need to remember due dates, reduces the risk of late fees or penalties, and offers convenience and flexibility.

However, e-mandate is not a new concept in India. It has existed since 2016, when the National Payments Corporation of India (NPCI) launched the National Automated Clearing House (NACH) platform to facilitate recurring payments. Yet, the adoption of e-mandate faced a gradual pace because of distinct challenges, including a lack of awareness, limited acceptance, and technical difficulties. 

To overcome these challenges and promote the use of e-mandate, the Reserve Bank of India (RBI) and NPCI have issued new guidelines for e-mandate implementation starting on October 1, 2021. These guidelines aim to make e-mandates more user-friendly, secure, and efficient. Today, we will explain how the e-mandate works, its key features, and how to cancel or modify an e-mandate.

How e-Mandate Works?

The process of e-mandate involves three parties: the customer, the merchant, and the bank. The customer is the person who wants to pay for a recurring service or product. The merchant is the business that provides the service or product and collects the payment. The bank is the financial institution facilitating the payment transaction between the merchant and the customer. Let’s break down the e-mandate process into three steps: register, authentication, and execution.

1. E-Mandate Registration

The first step is to register for an e-mandate with the merchant. Depending on the merchant’s preference, you can proceed with this online or offline. To complete the process, provide basic details, such as name, mobile number, email address, bank account number, and IFSC code. Also, specify the amount, frequency, and duration of the payment. For example, mention this if you want to pay Rs 10,000 monthly in a business loan EMI for 12 months.

The merchant then sends the e-mandate request to your bank for approval. The bank verifies the customer’s details and checks the availability of funds in your account.

2. Authentication

The second step is to authenticate the e-mandate with the bank. You must confirm the e-mandate request by entering a one-time password (OTP) sent by the bank to your registered mobile number or email address. The OTP is valid for a limited period, usually 10 minutes. Enter the OTP within this time frame to complete the authentication process.

The bank then drops a confirmation message to you and the merchant, informing both that the e-mandate for term loan has been successfully registered and activated.

3. Execution

This is the last step. The merchant initiates the payment transaction on the specified date and time per the e-mandate agreement. The merchant forwards the payment request to the bank, along with the e-mandate reference number and other details.

The bank then debits the amount from your account and credits it to the merchant’s account. The bank also sends a notification to you (customer) and the merchant, informing you about the payment transaction status.

You or the merchant do not need to manually intervene for the completion of the payment transaction. You can keep the e-mandate active until the duration ends or choose to cancel or modify it.

Key Features of E-Mandate

E-mandate is a simple and convenient way to pay for recurring services or products. It has several key features that make it attractive for both businesses and customers, such as:

One-time Password Confirmation 

You only have to authenticate the e-mandate once with the OTP. Following that, the system automatically completes payment transactions without requiring additional OTP verification. This reduces the friction and hassle of entering OTPs every time and ensures the security and privacy of your account details.

Auto-Reconciliation

The bank and the merchant can easily track and reconcile the payment transactions processed through e-mandate. The bank provides a detailed statement of the transactions, the e-mandate reference number, and other details. The merchant can also access the transaction history and status through the NPCI portal or the bank’s portal. This helps avoid disputes and errors and saves time and money for both parties.

Customer Redressal System

You can raise any issues or complaints related to e-mandate through the bank’s customer care service or the NPCI’s grievance redressal mechanism. The bank and the NPCI are responsible for resolving the issues and providing a satisfactory solution to the customer. This protects the customer’s rights and interests and builds trust and confidence in the e-mandate service.

Common Platform Integration

This service integrates with NPCI’s common platforms, including the Unified Payments Interface (UPI), Bharat Bill Payment System (BBPS), and Aadhaar Enabled Payment System (AEPS). That means you can use any platform to register, authenticate, and execute an e-mandate. 

You can also use any bank account or payment instrument, such as a debit card, credit card, or prepaid card, to pay through e-mandate. This provides more options and convenience to the customer and increases the service’s acceptance and reach.

How to Cancel or Modify an E-Mandate?

There may be situations where you may want to cancel or modify this service. For example, you may wish to change the amount, frequency, or duration of the payment or stop the payment altogether. If you opt for a small business loan balance transfer, you must switch to a different merchant or bank for the same service or product.

You have three options to cancel or modify e-mandate. These are

• OTP Authentication: You can cancel or modify an e-mandate by entering an OTP sent by the bank to your registered mobile number or email address. 
• Bank’s Net Banking Facility: Log into your net banking portal and access the e-mandate section. You can check the list of active e-mandates and choose the one you want to cancel or modify. Next, follow the instructions given by the bank to complete the cancellation or modification process.
• Contact Customer Executive: You can contact the merchant or the bank directly and request them to process your cancellation request. Provide the e-mandate reference number and other details to the merchant or the bank. After processing your request, the bank will inform you through email or text.

Conclusion

E-mandate is a new and convenient way of making recurring payments in India. It offers many benefits for businesses and consumers, such as reduced friction, higher customer retention, money savings, convenience, security, and flexibility. The e-mandate process is simple and easy and involves three parties: the merchant, the bank, and the card network. Creating, cancelling, modifying, and verifying an e-mandate is simple and easy and involves a few steps.

FAQs

Q.1. What is an e-mandate? 

Ans: An E-Mandate is a digital payment service initiated by the NPCI and RBI that provides infrastructure to businesses in India to collect recurring payments.

Q.2. How does an e-mandate work? 

Ans: E-Mandate works by allowing customers to authorise merchants to automatically debit a specified amount from their bank account or card at regular intervals for recurring payments.

Q.3. What are the benefits of using e-mandate? 

Ans: E-Mandate offers convenience, reduces paperwork, ensures timely payments, and provides a secure method for handling recurring transactions.

Q.4. Who can avail of the e-mandate service? 

Ans: Any customer with a bank account or debit card that supports the E-Mandate service can avail of it.

Q.5. Is there a fee for using the e-mandate service? 

Ans: The fee for using the E-Mandate service, if any, will be specified by the issuing bank or financial institution.

Q.6. Can I modify or cancel e-mandates? 

Ans: You can modify or cancel their E-Mandates through their bank’s customer service or online banking portal.

Q.7. What details are required to set up an e-mandate? 

Ans: You need to provide their bank account or card details, along with the authorisation for the recurring payment amount and frequency.

Q.8. Can customers view their active e-mandates? 

Ans: Customers can view the E-Mandates created on their cards or accounts through their banking portal or app.