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Banks ask RBI to enable recurring payments feature in UPI 2.0

The recurring debit feature was among the most anticipated by banks.

, ET Bureau|
Mar 22, 2019, 08.43 AM IST
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Meanwhile, ICICI Bank has upgraded its mobile application with select features of the technology.
Mumbai: Indian lenders want the central bank to let their customers with UPI 2.0-enabled devices use the recurring payments feature for monthly loan repayments, industry sources said.

The recurring debit feature was among the most anticipated by banks. It uses the newly-developed technology launched by the National Payment Corporation of India (NPCI) in August 2018.

However, citing concerns of possible misuse, the Reserve Bank of India (RBI) left this feature out from the official version, much to the disappointment of banks.

“This feature would have enabled customers to issue a onetime mandate to make recurring payments for periodic services rendered from merchants. The use cases for this would have been automatic payments of monthly bills and subscription-based services,” said a senior official at a major private sector bank.

After the technology was launched last year, Indian Banks’ Association, an industry body with representatives from major public sector and private sector banks, had sent a detailed proposal to the regulators seeking permission for using this feature by regulated financial entities. It would have allowed automatic debits of loans and premiums from customers wishing to avail the service, a person with direct knowledge of the matter said.

“We had asked the RBI to make the feature available just for bank customers as it would have simplified the process of credit recovery on services such as EMI, credit cards and insurance premiums…the RBI scrapped the feature because it felt the technology could be misused by unregulated operators to widen their credit network using pyramid schemes and chit funds,” the source said.

UPI 2.0 is an upgrade on the hugely successful Unified Payments Interface (UPI) interface that changed the Indian retail digital payment landscape after it was launched in 2016, a few months before demonetisation. The upgrade comes with additional features such as option to link UPI-account with customer’s overdraft (OD) account, one-time payment blocking option and invoice approval mechanism.

However, the technology is still under confidence-test with most major retail banks working on test-cases and demo versions to come out with a market-ready product. “We are testing out the technology and its different usecases. We haven’t finalised yet the launch deadline,” a senior official at the State Bank of India (SBI) told ET.

Meanwhile, ICICI Bank has upgraded its mobile application with select features of the technology. Among these is PayLater, a feature that gives customers an option to avail small credits on purchases from verified vendors up to a monthly limit of Rs 10,000.

“It is an instant digital credit facility to enable customers to buy small ticket items immediately in a completely digital and paperless manner...the facility enables customers to shop online, pay bills and pay any merchant UPI ID at physical stores instantly,” said B Madhivanan, chief technology and digital officer, ICICI Bank.

The tech is also expected to add a new dynamic to the already burgeoning payments landscape by its potential use-cases to enhance and secure peer to merchant (P2M) payment solutions.

“In the existing UPI landscape, about 90% of the value is coming through P2P (peer-to-peer) payments. Once these functionalities of UPI 2.0 come, we will see P2M (peer-to-merchant) payments rise,” said a spokesperson from Axis Bank. “We are in the final stage of testing and will look to launch this product in the next few days. The features are good additions to the existing UPI interface for both customers and merchants.”

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