RBI Raises Mutual Fund E-Mandate Limit Without AFA to Rs 1 Lakh

Key Takeaways:

1. The RBI has raised the limit for e-mandates for mutual fund transactions without the need for Additional Factor of Authentication (AFA) to Rs 1 lakh.

2. This decision is part of the RBI’s efforts to promote digital transactions and enhance the adoption of e-mandates for categories such as mutual fund subscriptions, insurance premium payments, and credit card bill payments.

3. The existing limit for e-mandates without AFA was Rs 15,000, and the increase to Rs 1 lakh is expected to facilitate higher-value transactions in these categories.

4. The RBI has emphasized that other requirements such as pre- and post-transaction notifications and opt-out facilities for users will continue to apply to these transactions.

The Reserve Bank of India (RBI) has made a significant decision to increase the limit for e-mandates for mutual fund transactions without the requirement of Additional Factor of Authentication (AFA) to Rs 1 lakh. This decision was announced by RBI Governor Shaktikanta Das during the Monetary Policy Committee (MPC) meeting, where the committee decided to maintain the policy rate (Repo Rate) at 6.5%.

The key points from the information you provided:

1. Increase in E-Mandate Limit: The RBI has proposed to exempt the requirement of AFA for transactions up to Rs 1 lakh in categories such as subscription to mutual funds, payment of insurance premiums, and payments of credit card bills. This move is aimed at allowing mutual fund investors to invest more via e-mandates without AFA.

2. Background on Policy Rate: The MPC has decided to hold the policy rate (Repo Rate) at 6.5%. This decision comes after the central bank had paused rate hikes since February, during which it had increased rates by 2.5% to control inflation.

3. Framework for E-Mandates: The framework for processing e-mandates for recurring transactions was introduced in August 2019 to balance the safety and security of digital transactions with customer convenience. The current limit for executing e-mandates without AFA stands at Rs 15,000, as of the last update in June 2022.

4. Adoption and Transaction Volume: The number of e-mandates registered currently stands at 8.5 crore, processing nearly Rs 2,800 crores of transactions per month. However, in categories such as subscription to mutual funds, payment of insurance premiums, and credit card bill payments, where the transaction sizes exceed Rs 15,000, there has been a need to enhance the limit due to lagging adoption.

5. Continued Requirements: The RBI has emphasized that other existing requirements such as pre- and post-transaction notifications, opt-out facilities for users, etc., will continue to apply to these transactions.

This decision by the RBI is expected to facilitate higher-value transactions in the specified categories and promote digital transactions in the mutual fund and financial services sector.

FAQ:

Q1: What is the significance of the RBI’s decision to increase the e-mandate limit for mutual fund transactions without AFA?

A1: The increase in the e-mandate limit to Rs 1 lakh is aimed at facilitating higher-value transactions in categories such as mutual fund subscriptions, insurance premium payments, and credit card bill payments, thereby promoting digital transactions and enhancing customer convenience.

Q2: Will the existing requirements for e-mandates without AFA continue to apply to these transactions?

A2: Yes, the RBI has stated that other existing requirements such as pre- and post-transaction notifications and opt-out facilities for users will continue to apply to these transactions.