You can register SIP or EMI e-mandate based on debit card, netbanking details

  • At least three banks are “under certification” at NPCI for the debit card-based e-mandate system
  • When you take a loan or start an SIP, you permit the lender or the mutual fund company to debit money from your account periodically

Registering a mandate for recurring payments like systematic investment plans (SIPs) and equated monthly instalments (EMIs) will now be easier for customers of Kotak Mahindra Bank. The bank has become the first bank to go live with debit card- as well as netbanking-based electronic mandate, using the National Payments Corp. of India’s (NPCI) new e-mandate platform.

Other banks too are expected to offer this facility soon. At least three banks are “under certification" at NPCI for the debit card-based e-mandate system, while State Bank of India has completed the certification, but is not live yet. Many other banks are also under certification or have completed it (To see banks’ status click here).

What is an e-mandate?

When you take a loan or start an SIP, you permit the lender or the mutual fund company to debit money from your account periodically. Earlier, this was done through the electronic clearing system (ECS). For the past few years, this is being done through the National Automatic Clearing House (NACH). The mandate or permission is given by filling up and signing a physical form. The company that needs to debit money from your account takes the form to your bank as proof that you have allowed it to withdraw money from your account periodically.

The process became more efficient through e-NACH, where a digital submission and verification was made. Under e-NACH, the maximum time taken for registering the mandate came down to two days from 10-15 days earlier. The e-sign-based e-mandate used Aadhaar-based e-signature to take customers’ authorisation. However, the Supreme Court judgment in September 2018 on Aadhaar declared the portion of Section 57 of the Aadhaar Act that enabled private companies to use Aadhaar for establishing the identity of an individual as unconstitutional. This hit instant e-KYC (know your customer) through Aadhaar, and Aadhaar-based e-signature. Eventually, NPCI decided to suspend e-NACH in November 2018. While the e-sign-based e-mandate was suspended, the older NACH system continued.

Most fintech companies in the lending business were early adopters of the e-sign-based e-mandate as it cut the processing time and the costs. For consumers too, a digital process meant faster service and reduction or elimination of paperwork.

Some banks and mutual funds allowed consumers to use the bill-pay system to make periodic payments like SIPs, which is also a completely digital process. However, that didn’t work for lending companies as they need to pull money from bank accounts based on a contract.

What’s new?

Customers of Kotak Mahindra Bank will now be able to place an e-mandate using their debit cards or netbanking. This would not require Aadhaar-based e-sign to authenticate the identity of the user. Instead, unique debit card details or internet banking credentials will be used.

Once the system is available across major banks, registering an e-mandate for EMIs or SIPs would become a smoother experience for you.