RBI Allows MF Investors To Take SIP Through UPI

RBI Allows MF Investors To Take SIP Through UPI
Yagnesh Kansara - 13 January 2020

In pursuance of its vision to promote digital payments, the Reserve Bank of India (RBI) has taken yet another significant step that will result in rapid growth of retail digital payments in the country. RBI on Friday said, it would permit processing of e-mandate on recurring transactions via the unified payments interface (UPI) system.
Customers will now be able to sign up and pay for products such as Mutual Fund SIP and insurance premiums that involve recurring payments with UPI. This facility was earlier available only for card and wallet-based payments.
RBI, in a notification issued on Friday last said, “On a review of the developments since this facilitation, it has been decided to extend the above instructions to cover UPI transactions as well. All the instructions/conditions outlined in the circular under reference would apply, mutatis mutandis, while processing e-mandate in UPI”.
In August Last year, the central bank had allowed processing of e-mandate on cards for recurring transactions. “The e-mandate arrangement on cards shall be only for recurring transactions and not for a ‘once-only’ payment,” RBI had said last year.
RBI had then further said, “A cardholder desirous of opting for e-mandate facility on card shall undertake a one-time registration process, with AFA validation by the issuer. An e-mandate on card for recurring transactions shall be registered only after successful AFA validation, in addition to the normal process required by the issuer.” This facility will now also be available for UPI users.
What’s new
With the new facility, UPI users will be able to bypass additional factor authentication (AFA) required for each payment to a regular merchant. UPI users will now be able to make regular payments by giving a one-time instruction to UPI service providers.
Transaction limit
According to RBI, the limit for e-mandate based recurring transactions without AFA is Rs 2,000 per transaction. Transactions above this cap are also subject to AFA. The limit of Rs 2,000 per transaction is applicable for all categories of merchants who accept repetitive payments based on such e-mandates. No charges will be levied on such transactions from the user availing the e-mandate facility.
As of December 2019, the mutual fund industry had 2.97 crore active SIP accounts contributing Rs 8,518 crore. This implies an average SIP ticket size of Rs 2,861.At present there are only about 2 crore investors in mutual funds out of India’s population of 135 crore.
This rapid growth in the payment systems, inter-alia, has been facilitated by a series of measures taken by the RBI. Digital payments constituted a high 96 per cent of total non-cash retail payments during the period October 2018 to September 2019. During the same period, the National Electronic Funds Transfer (NEFT) and Unified Payments Interface (UPI) systems handled 252 crore and 874 crore transactions with year on year growth of 20 per cent and 263 per cent, respectively.
According to the National Payments Corporation of India (NPCI), UPI currently has around 10 crore users and this should increase to 50 crore in another 3 years.