non oil companies allowed to market transport fuels

PIB press release dated 23rd October, 2019

Cabinet Committee on Economic Affairs (CCEA) chaired by Prime Minister Narendra Modi has approved the Review of Guidelines for Granting Authorization to market Transportation Fuels. This marks a major reform of the guidelines for marketing of petrol and diesel.

The existing policy for granting authorization to market transportation fuels had not undergone any changes for the last 17 years since 2002. It has now been revised to bring it in line with the changing market dynamics and with a view to encourage investment from private players, including foreign players, in this sector. The new Policy will give a fillip to ‘Ease of Doing Business’, with transparent policy guidelines. It will boost direct and indirect employment in the sector. Setting up of more retail outlets (ROs) will result in better competition and better services for consumers

Salient features & Major Impact:

• Much lower entry barrier for private players - the entities seeking authorisation would need to have a minimum net worth of Rs.250 crore vis-à-vis the current requirement of Rs. 2000 crore prior investment.
• Non – Oil Companies can also invest in the retail sector. Requirement of prior investment in Oil and Gas Sector, mainly in exploration and production, refining, pipelines/terminals etc., has been done away with.
• The entities seeking market authorisation for petrol and diesel are allowed to apply for retail and bulk authorisation separately or both
• The companies have been given flexibility in setting up a Joint Venture or Subsidiary for market authorisation.
• In addition to conventional fuels, the authorized entities are required to install facilities for marketing at least one new generation alternate fuel, like CNG, LNG, biofuels, electric charging, etc. at their proposed retail outlets within 3 years of operationalization of the said outlet
• More private players, including Foreign players, are expected to invest in retail fuel marketing leading to better competition and better services for consumers
• The new entities will bring in latest technology for marketing of fuels and also encourage digital payments at the ROs.
• Entities will also encourage employment of women and ex-servicemen at the retail outlets.
• CCTV facilities will be set up at all retail outlets
• The authorised entities are required to set up minimum 5% of the total retail outlets in the notified remote areas within 5 years of grant of authorisation. A robust monitoring mechanism has been set up to monitor this obligation.
• An individual may be allowed to obtain dealership of more than one marketing company in case of open dealerships of PSU OMCs but at different sites.

independent directors - online test

MCA has vide amendment to the Companies (Appointment & Remuneration of Directors), Rules, 2014 mandated that all independent directors have to register themselves on an online link provided by the Indian Institute of Corporate Affairs (IICA). He has to apply online to register his name in a data bank provided by the IICA and that registration can be for 1 year, 5 years or lifetime. The independent director should ensure that his registration at the IICA portal is there as long as he is continuing to be an independent director. The registration at the portal should be done within 3 months of the commencement of this amendment, which is 22nd October, 2019. Therefore, the registration should be done on or before 21st January, 2020.

There is a renewal process also whereby the independent director concerned can renew his registration at this portal for a further period of 1 year, 5 years as the case may be within 30 days of the expiry of the first registration. Obviously, the renewal process is not applicable to those persons who have registered themselves for a lifetime basis at this portal.

Every independent director should also give a declaration of compliance of this rule alongwith their annual declaration of compliance as required u/s 149 of the companies act, 2013 ("the Act").

Every independent director should also pass an online proficiency self assessment test conducted by the IICA within a period of one year from the date from which his name is included in the data bank, or else his name will be removed from the data bank.

The companies should in their Directors' Report add a paragraph regarding opinion of the Board with regard to integrity, expertise and experience (including proficiency) of the independent directors appointed during the year. This provision has been made in an amendment to the Companies (Accounts) Rules, 2014. This amendment will come into force with effect from 1st December, 2019.
The explanation to this amendment clarifies that the proficiency is to be determined on the basis of the online proficiency test conducted by the IICA.

Passing marks for clearing this online proficiency test by the IICA is 60%. An individual can take any number of attempts in order to pass the test.

There are exceptions such as : those individuals who have served for not less than 10 years in any company or one or two companies put together either as a Director or as KMP in listed public companies and unlisted public companies having paid up capital of Rs.10 crores and above are not required to take the online proficiency test.

Individuals can also voluntarily apply to be included in the above said data bank and it includes persons not presently having a DIN also.

All this does not come free, so there shall be a reasonable fee to be charged from an individual whilst registering his name on the data bank, and also to the companies who refer to this data bank whilst selecting independent directors for their companies. There shall be no fees, however, for taking the online test. 

external benchmark based lending

RBI circular dated 4th September, 2019 follows

As you are aware, Reserve Bank had constituted an Internal Study Group (ISG) to examine various aspects of the marginal cost of funds-based lending rate (MCLR) system. The final report of the ISG was published in October 2017 for public feedback. The ISG observed that internal benchmarks such as the Base rate/MCLR have not delivered effective transmission of monetary policy. The Study Group had, therefore, recommended a switchover to an external benchmark in a time-bound manner.

2. As a step in that direction, it was announced in the fifth bi-monthly Monetary Policy Statement for 2018-19 under ‘Statement on Developmental and Regulatory Policies’ dated December 05, 2018, that all new floating rate personal or retail loans and floating rate loans to Micro and Small Enterprises extended by banks from April 1, 2019 shall be linked to external benchmarks. Subsequently, it was announced in the first bi-monthly Monetary Policy Statement for 2019-20 under ‘Statement on Developmental and Regulatory Policies’ dated April 04, 2019 to hold further consultations with stakeholders and work out an effective mechanism for transmission of rates. Based on the consultations with stakeholders, it has now been decided to link all new floating rate personal or retail loans (housing, auto, etc.) and floating rate loans to Micro and Small Enterprises extended by banks with effect from October 01, 2019 to external benchmarks.

3. Accordingly, RBI instructions contained in Master Direction on Interest Rate on Advances issued vide DBR.Dir.No.85/13.03.00/2015-16 dated March 03, 2016 are amended as under:

3.1 The existing paragraph No. 7 of the aforesaid Master Direction stands replaced as under:

(a) All new floating rate personal or retail loans (housing, auto, etc.) and floating rate loans to Micro and Small Enterprises extended by banks from October 01, 2019 shall be benchmarked to one of the following:

 - Reserve Bank of India policy repo rate

 - Government of India 3-Months Treasury Bill yield published by the Financial Benchmarks India Private Ltd (FBIL)

- Government of India 6-Months Treasury Bill yield published by the FBIL

- Any other benchmark market interest rate published by the FBIL.

(b) Banks are free to offer such external benchmark linked loans to other types of borrowers as well.

(c) In order to ensure transparency, standardisation, and ease of understanding of loan products by borrowers, a bank must adopt a uniform external benchmark within a loan category; in other words, the adoption of multiple benchmarks by the same bank is not allowed within a loan category.

3.2 A new paragraph No.8(e) is added to the aforesaid Master Direction as given below:

Spread under External Benchmark

Banks are free to decide the spread over the external benchmark. However, credit risk premium may undergo change only when borrower’s credit assessment undergoes a substantial change, as agreed upon in the loan contract. Further, other components of spread including operating cost could be altered once in three years.

3.3 A new paragraph No. 9(ii) is added to the aforesaid Master Direction as given below:

Reset of Interest Rates under External Benchmark

The interest rate under external benchmark shall be reset at least once in three months.

3.4 A new paragraph No. 11(ii) is added to the aforesaid Master Direction as given below:

Transition to External Benchmark from MCLR/Base Rate/BPLR

Existing loans and credit limits linked to the MCLR/Base Rate/BPLR shall continue till repayment or renewal, as the case may be.

Provided that floating rate term loans sanctioned to borrowers who, in terms of extant guidelines, are eligible to prepay a floating rate loan without pre-payment charges, shall be eligible for switchover to External Benchmark without any charges/fees, except reasonable administrative/ legal costs. The final rate charged to this category of borrowers, post switchover to external benchmark, shall be same as the rate charged for a new loan of the same category, type, tenor and amount, at the time of origination of the loan.

Provided that other existing borrowers shall have the option to move to External Benchmark at mutually acceptable terms.

Provided that the switch-over shall not be treated as a foreclosure of existing facility.

4. The existing paragraph No. 2 of the aforesaid Master Direction is applicable for Small Finance Banks and Local Area Banks and the para is amended accordingly.

5. The existing paragraph No. 3(a)(iv) of the aforesaid Master Direction stands amended as under:

External benchmark rate means the reference rate which includes:

1. Reserve Bank of India policy Repo Rate
2. Government of India 3-Months and 6-Months Treasury Bill yields published by Financial Benchmarks India Private Ltd (FBIL)
3. Any other benchmark market interest rate published by FBIL.

6. Some of the sub-paragraphs of para 4(a) of the aforesaid Master Direction stands amended as given hereunder:

(ii) All floating rate loans, except those mentioned in Section 13, shall be priced with reference to the benchmark indicated in chapter III.

(iv) When the floating rate advances are linked to an internal benchmark rate, banks shall determine their actual lending rates by adding the components of spread to the internal benchmark rate.

(vi) Interest rates on fixed rate loans of tenor below 3 years shall not be less than the benchmark rate for similar tenor and shall be as per directions contained in Section 13(d)(v).

7. A new paragraph No. 4(a)(xi) is added to the aforesaid Master Direction as indicated below:

There shall be no lending below the benchmark rate for a particular maturity for all loans linked to that benchmark.

8. The existing paragraph No. 6(a)(i) of the aforesaid Master Direction stands amended as under:

All floating rate rupee loans sanctioned and renewed between July 1, 2010 and March 31, 2016 shall be priced with reference to the Base Rate which will be the internal benchmark for such purposes.

9. The existing paragraph No. 6(b)(i) of the aforesaid Master Direction stands amended as under:

All floating rate rupee loans sanctioned and renewed w.e.f. April 1, 2016 shall be priced with reference to the Marginal Cost of Funds based Lending Rate (MCLR) which will be the internal benchmark for such purposes subject to the provisions contained in paragraph 7 of this Master Direction.

10. A new paragraph No. 9 (i)(d) is added to the aforesaid Master Direction as indicated below:

The periodicity of the reset under MCLR shall correspond to the tenor/maturity of the MCLR to which the loan is linked.

11. The following part of the sub-paragraphs (a), (b), (c) of para 13 of the aforesaid Master Direction as indicated hereunder stands deleted:

“shall be exempted from being linked to Base rate/MCLR as the benchmark for determining interest rate’’

12. The following part of the paragraph 13(d) of the aforesaid Master Direction as indicated hereunder stands deleted:

“shall be priced without being linked to Base rate/MCLR as the benchmark for determining interest rate’’

Arbitration

The Arbitration and Conciliation (Amendment) Act, 2019 was notified on 9^th August, 2019. Sub-Section 2 of Section 1 of the Arbitration and Conciliation (Amendment) Act, 2019 provides as under:-

“(2) Save as otherwise provided in this Act, it shall come into force on such date as the Central Government may, by notification in the Official Gazette, appoint and different dates may be appointed for different provisions of this Act and any reference in any such provision to the commencement of this Act shall be construed as a reference to the coming into force of that provision.”

2.         The Central Government by exercising powers conferred under sub-section 1 of the Arbitration and Conciliation (Amendment) Act, 2019, appoints the 30^th August, 2019, for enforcement of the following Sections of the  Arbitration and Conciliation (Amendment) Act, 2019:-

(i)         Section 1;

(ii)        Section 4 to 9 [both inclusive];

(iii)       Section 11 to Section 13 [both inclusive];

(iv)       Section 15.

3.         Necessary Gazette Notification in this regard has been issued by the Central Government. In pursuance of the above notification, the section 17, 23,29A, 34, 37, 45 and 50 of the Arbitration and Conciliation Act, 1996 (the Act) stand amended. Also three new sections namely 42A, 42B, and 87 stand inserted in the Act. The insertion of section 87 is with retrospective effect i.e. 23^rd October, 2015, with a view to clarify the applicability of the said cut-off date on arbitration and related court proceedings.

Start-up Circulars

In order to provide hassle-free tax environment to the Start-ups, a series of announcements have been made by Union Finance & Corporate Affairs Minister Smt. Nirmala Sitharaman in her General Budget Speech, 2019, and also on 23rd August 2019. To give effect to these announcements, the Central Board of Direct Taxes (CBDT) issued various circulars/clarifications in the matter from time to time. Vide Circular No.22/2019 dated 30.08.2019, CBDT has consolidated all the circulars/clarifications issued on this subject for the ease of compliance of Start-up entities. The present circular inter alia highlights the following:-

• Simplification of process of assessment of Start-ups: Circular No. 16/2019 dated 7th of August, 2019 provided for the simplified procedure of assessment of Start-ups recognized by DPIIT. The circular covered cases under “limited scrutiny”, cases where multiple issues including issue of section 56(2)(viib) were involved or cases where Form No.2 was not filed by the Start-up entity. Detailed process of obtaining mandatory approval of the supervisory authorities for conducting enquiry was also laid down by this circular.
• Time limit for Completion of pending assessments of Start-ups: The time limit for completion of pending assessments was also specified by CBDT. All cases involving “limited scrutiny” were to be completed preferably by 30th September, 2019 and the other cases of Start-ups were to be disposed off on priority, preferably by 31st October, 2019.
• Procedure for addition made u/s 56(2)(viib) in the past assessment: Vide clarification issued on 9th August,2019 it was provided that the provisions of section 56(2)(viib) of the Act would also not be applicable in respect of assessment made before 19th February, 2019 if a recognised Start-up had filed declaration in Form No. 2. The timelines for disposal of appeals before CsIT(Appeals) was also specified. Further, the addition made under section 56(2)(viib) would also not be pressed in further appeal.
• Income-tax demand: It has been reiterated time and again by CBDT that outstanding income-tax demand relating to additions made under section 56(2)(viib) would not be pursued and no communication in respect of outstanding demand would be made with the Start-up entity. Other income-tax demand of the Start-ups would not be pursued unless the demand was confirmed by ITAT.
• Constitution of Start-up Cell: Vide order dated 30.08.2019, CBDT has constituted a Start-up Cell under the aegis of Member(IT&C), CBDT to redress grievances and to address various tax related issues in the cases of Start-ups. Grievances can also be filed online at startupcell.cbdt@gov.in.

The Circular No.22/2019 dated 30.08.2019 is available on www.incometaxindia.gov.in.

Review of FDI Policy

The Union Cabinet chaired by the Prime Minister Shri Narendra Modi has approved the proposal for Review of Foreign Direct Investment on various sectors.

Major Impact and Benefits from FDI Policy Reform

1. The changes in FDI policy will result in making India a more attractive FDI destination, leading to benefits of increased investments, employment and growth.
2. In the coal sector, for sale of coal, 100% FDI under automatic route for coal mining,activities including associated processing infrastructure will attract international players to create an efficient and competitive coal market.
3. Further, manufacturing through contract contributes equally to the objective of Make in India. FDI now being permitted under automatic route in contract manufacturing will be a big boost to Manufacturing sector in India.
4. Easing local sourcing norms for FDI in Single Brand Retail Trading (SBRT) was announced in Union Budget Speech of Finance Minister. This will lead to greater flexibility and ease of operations for SBRT entities, besides creating a level playing field for companies with higher exports in a base year. In addition, permitting online sales prior to opening of brick and mortar stores brings policy in sync with current market practices. Online sales will also lead to creation of jobs in logistics, digital payments, customer care, training and product skilling.
5. The above amendments to the FDI Policy are meant to liberalize and simplify the FDI policy to provide ease of doing business in the country, leading to larger FDI inflows and thereby contributing to growth of investment, income and employment.

Background

FDI is a major driver of economic growth and a source of non-debt finance for the economic development of the country. Government has put in place an investor friendly policy on FDI, under which FDI up to 100% is permitted on the automatic route in most sectors/ activities. FDI policy provisions have been progressively liberalized across various sectors in recent years to make India an attractive investment destination. Some of the sectors include Defence, Construction Development, Trading, Pharmaceuticals, Power Exchanges, Insurance, Pension, Other Financial Services, Asset reconstruction Companies, Broadcasting and Civil Aviation.

These reforms have contributed to India attracting record FDI inflows in the last 5 years. Total FDI into India from 2014-15 to 2018-19 has been US $ 286 billion as compared to US $ 189 billion in the 5-year period prior to that (2009-10 to 2013-14). In fact, total FDI in 2018-19 i.e. US $ 64.37 billion (provisional figure) is the highest ever FDI received for any financial year.

Global FDI inflows have been facing headwinds for the last few years. As per UNCTAD's World Investment Report 2019, global foreign direct investment (FDI) flows slid by 13% in 2018, to US $1.3 trillion from US $1.5 trillion the previous year - the third consecutive annual decline. Despite the dim global picture, India continues to remain a preferred and attractive destination for global FDI flows. However, it is felt that the country has the potential to attract far more foreign investment which can be achieved inter-alia by further liberalizing and simplifying the FDI policy regime.

In Union Budget 2019-20, Finance Minister proposed to further consolidate the gains under FDI in order to make India a more attractive FDI destination. Accordingly, the Government has decided to introduce a number of amendments in the FDI Policy. Details of these changes are given in the following paragraphs.

Coal Mining

As per the present FDI policy, 100% FDI under automatic route is allowed for coal & lignite mining for captive consumption by power projects, iron & steel and cement units and other eligible activities permitted under and subject to applicable laws and regulations. Further, 100% FDI under automatic route is also permitted for setting up coal processing plants like washeries subject to the condition that the company shall not do coal mining and shall not sell washed coal or sized coal from its coal processing plants in the open market and shall supply the washed or sized coal to those parties who are supplying raw coal to coal processing plants for washing or sizing.

It has been decided to permit 100% FDI under automatic route for sale of coal, for coal mining activities including associated processing infrastructure subject to provisions of Coal Mines (special provisions) Act, 2015 and the Mines and Minerals (development and regulation) Act, 1957 as amended from time to time, and other relevant acts on the subject. "Associated Processing Infrastructure" would include coal washery, crushing, coal handling, and separation (magnetic and non-magnetic)

Contract Manufacturing

• The extant FDI policy provides for 100% FDI under automatic route in manufacturing sector. There is no specific provision for Contract Manufacturing in the Policy. In order to provide clarity on contract manufacturing, it has been decided to allow 100% FDI under automatic route in contract manufacturing in India as well. 

• Subject to the provisions of the FDI policy, foreign investment in 'manufacturing' sector is under automatic route. Manufacturing activities may be conducted either by the investee entity or through contract manufacturing in India under a legally tenable contract, whether on Principal to Principal or Principal to Agent basis.

Single Brand Retail Trading (SBRT)

1. The extant FDI Policy provides that 30% of value of goods has to be procured from India if SBRT entity has FDI more than 51%. Further, as regards local sourcing requirement, the same can be met as an average during the first 5 years, and thereafter annually towards its India operations. With a view to provide greater flexibility and ease of operations to SBRT entities, it has been decided that all procurements made from India by the SBRT entity for that single brand shall be counted towards local sourcing, irrespective of whether the goods procured are sold in India or exported. Further, the current cap of considering exports for 5 years only is proposed to be removed, to give an impetus to exports.
2. The extant Policy provides that as regards local sourcing requirement, incremental sourcing for global operations by the non-resident entities undertaking single brand retail trading, either directly or through their group companies, will also be counted towards local sourcing requirement for the first 5 years. However, prevalent business models involve not only sourcing from India for global operations by the entity or its group companies, but also through an unrelated third Party, done at the behest of the entity undertaking single brand retail trading or its group companies. In order to cover such business practices, it has been decided that 'sourcing of goods from India for global operations' can be done directly by the entity undertaking SBRT or its group companies (resident or non-resident}, or indirectly by them through a third party under a legally tenable agreement.
3. The extant policy provides that only that part of the global sourcing shall be counted towards local sourcing requirement which is over and above the previous year's value. Such requirement of year-on-year incremental increase in exports induces aberrations in the system as companies with lower exports in a base year or any of ' the subsequent years can meet the current requirements, while a company with consistently high exports gets unduly discriminated against. It has been now decided that entire sourcing from India for global operations shall be considered towards local sourcing requirement. (And no incremental value)
4. The present policy requires that SBRT entities have to operate through brick and mortar stores before starting retail trading of that brand through e-commerce. This creates an artificial restriction and is out of sync with current market practices. It has therefore been decided that retail trading through online trade can also be undertaken prior to opening of brick and mortar stores, subject to the condition that the entity opens brick and mortar stores within 2 years from date of start of online retail. Online sales will lead to creation of jobs in logistics, digital payments, customer care, training and product skilling.

Digital Media

The extant FDI policy provides for 49% FDI under approval route in Up-linking of 'News &Current Affairs' TV Channels. It has been decided to permit 26% FDI under government route for uploading/ streaming of News & Current Affairs through Digital Media, on the lines of print media.

Motor Vehicles Amendment Act

he Ministry of Road Transport and Highways has notified today, through S.O. No 3110(E), the provisions of the Motor Vehicles Amendment Act 2019 that will be applicable with effect from 1st of September 2019. These are provisions which require no further amendments in the Central Motor Vehicles Rules 1989. Important among the provisions notified today are the provisions  for enhanced penalties.

For the remaining provisions the Ministry has initiated the process of formulating draft rules. As and when the process is completed, the relevant provisions would be notified for implementation.

The attached table gives a brief of the provisions that have been notified today, and would be applicable from the 1st of September. To access the link click here

Innovators growth platform

SEBI board meeting decision held on 21st August, 2019

Norms for permitting companies listed on the Innovators Growth Platform with an option to trade under regular category

The Board approved the norms for migration of companies listed on the Innovators Growth Platform (IGP) to regular trade category of the main board. The key proposals approved by the Board are as follows:

1. The Company should have been listed on the Innovators Growth Platform for a minimum period of one year.

2. At the time of making the application for trading under regular category of main board, the number of shareholders should be minimum 200.

3. The company should have profitability/ net worth track record of 3 years or have 75% of its capital as on the date of application for migration held by Qualified Institutional Buyers in accordance with Regulation 6(1) and 6(2) of the ICDR Regulations for main board listings.

4. Minimum promoters contribution shall be 20% which shall be locked in for 3 years. Period of earlier lock-in of 6 months served at the time of listing on IGP shall be deducted from the stipulated lock-in requirement of 3 years.

foreign portfolio investors

Decisions taken at the SEBI board meeting held on 21st August, 2019

Review of SEBI (Foreign Portfolio Investors) Regulations

The Board considered the recommendations of the working group constituted for reviewing the SEBI (Foreign Portfolio Investors) Regulations, 2014 and approved the proposed new set of Regulations.

The key focus of the proposed Regulations is to simplify and rationalize the existing regulatory framework for foreign portfolio investors (FPIs) in terms of easing the operational constraints and compliance requirements. 57 circulars and 183 FAQs pertaining to FPIs issued over the years have been merged into new regulations and a single circular. Some of the key aspects of revised regulations include:

1. To simplify and expedite the registration process and to bring about ease in compliance requirements for FPIs, the broad based eligibility criteria for institutional foreign investors has been done away with.

2. On reviewing the risk profiling of the FPIs, it is decided that the FPIs may be re-categorized into two categories - Category I and II, instead of the present requirement of three categories.

3. Registration for multiple investment manager (MIM) structures has been simplified.

4. Considering that the central banks are relatively long term, low risk investors directly/ indirectly managed by the Government, the central banks that are not the members of BIS (Bank for International Settlement) shall also be eligible for FPI registration.

5. The entities established in the international financial services center (IFSC) be deemed to have met the jurisdiction criteria for FPIs.

6. Documentation requirements for KYC have been simplified.

7. FPIs shall be permitted for off-market transfer of securities which are unlisted, suspended or illiquid, to a domestic or foreign investor.

8. Offshore funds floated by Indian Mutual Funds shall now be permitted to invest in India after obtaining registration as FPI.

9. The requirements for issuance and subscription of Offshore Derivative Instruments (ODIs) have been rationalized.

e-mandate on cards

RBI has allowed processing of e-mandate on cards for recurring transactions with Additional Factor Authorisation. Gist of RBI circular dated 21st August, 2019 follows:

The Reserve Bank of India (RBI) has, over the past decade, put in place various safety and security measures for card payments, including the requirement of Additional Factor of Authentication (AFA), especially for ‘card-not-present’ transactions. Recurring transactions based on standing instructions given to the merchants by the cardholders were brought within the ambit of AFA, vide RBI’s circular DPSS.PD.CO.No.223/02.14.003/2011-2012 dated August 4, 2011.

2. The RBI has been receiving requests from industry stakeholders to allow processing of e-mandate on cards for recurring transactions with AFA during e-mandate registration and first transaction, and simple / automatic subsequent successive transactions. Keeping in view the changing payment needs and the requirement to balance the safety and security of card transactions with customer convenience, it has been decided to permit processing of e-mandate on cards for recurring transactions (merchant payments) with AFA during e-mandate registration, modification and revocation, as also for the first transaction, and simple / automatic subsequent successive transactions, subject to conditions listed in the Annex.

3. This circular is applicable for transactions performed using all types of cards – debit, credit and Prepaid Payment Instruments (PPIs), including wallets.

4. The maximum permissible limit for a transaction under this arrangement shall be ₹ 2,000/-.

5. All other instructions related to card transactions shall be applicable on these e-mandate based recurring card transactions.

6. No charges shall be levied or recovered from the cardholder for availing the e-mandate facility on cards for recurring transactions.

7. This directive, issued under Section 10 (2) read with Section 18 of Payment and Settlement Systems Act, 2007 (Act 51 of 2007), will come into effect from September 1, 2019.

8. This facility may be reviewed, in due course, for extension to other digital modes of payments.

---

Annex

Conditions to be fulfilled for processing e-mandate on cards for recurring transactions
(DPSS.CO.PD.No.447/02.14.003/2019-20 dated August 21, 2019)

Applicability

1. The e-mandate arrangement on cards shall be only for recurring transactions and not for a ‘once-only’ payment.

Registration of card details for e-mandate based recurring transactions

2. 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.

3. Registration shall be completed only after all requisite information is obtained by the issuer, including the validity period of the e-mandate and other audit trail related requirements. The facility to modify the validity period of the e-mandate at a later stage, if required, shall also has to be provided for.

4. During the registration process, the cardholder shall be given an option to provide the e-mandate for either a pre-specified fixed value of recurring transaction or for a variable value of the recurring transaction; in the case of the latter, the cardholder shall clearly specify the maximum value of recurring transactions, subject to the overall cap fixed by the RBI (currently ₹ 2,000/- per transaction).

5. Any modification in existing e-mandate shall entail AFA validation by the issuer.

Processing of first transaction and subsequent recurring transactions

6. While processing the first transaction in e-mandate based recurring transaction series, AFA validation shall be performed. If the first transaction is being performed along with the registration of e-mandate, then AFA validation may be combined. All such AFA validation shall be as per extant instructions of the RBI.

7. Subsequent recurring transactions shall be performed only for those cards which have been successfully registered and for which the first transaction was successfully authenticated and authorised. These subsequent transactions may be performed without AFA.

Pre-transaction notification

8. As a risk mitigant and customer facilitation measure, the issuer shall send a pre-transaction notification to the cardholder, at least 24 hours prior to the actual charge / debit to the card. While registering e-mandate on the card, the cardholder shall be given facility to choose a mode among available options (SMS, email, etc.) for receiving the pre-transaction notification from the issuer in a clear, unambiguous manner and in an understandable language. The facility for changing this mode of receiving pre-transaction notification, shall also be provided to the cardholder.

9. The pre-transaction notification shall, at the minimum, inform the cardholder about the name of the merchant, transaction amount, date / time of debit, reference number of transaction/ e-mandate, reason for debit, i.e., e-mandate registered by the cardholder.

10. On receipt of the pre-transaction notification, the cardholder shall have the facility to opt-out of that particular transaction or the e-mandate. Any such opt-out shall entail AFA validation by the issuer. On receipt of intimation of such an opt-out, the issuer shall ensure that the particular transaction is not effected / further recurring transactions are not effected (as the case may be). A confirmation intimation to this effect shall be sent to the cardholder.

Post-transaction notification

11. In line with the extant instructions, the issuer shall send post-transaction alert / notification to the cardholder. This notification shall, at the minimum, inform the cardholder about the name of the merchant, transaction amount, date / time of debit, reference number of transaction / e-mandate, reason for debit, i.e., e-mandate registered by the cardholder.

Transaction limit and velocity check

12. The cap / limit for e-mandate based recurring transactions without AFA will be ₹ 2,000/- per transaction. Transactions above this cap shall be subject to AFA as hitherto.

13. The limit of ₹ 2,000/- per transaction is applicable for all categories of merchants who accept repetitive payments based on such e-mandates.

14. Suitable velocity checks and other risk mitigation procedures shall be put in place by issuers.

Withdrawal of e-mandate

15. The issuer shall provide the cardholder an online facility to withdraw any e-mandate at any point of time following which no further recurring transactions shall be allowed for the withdrawn e-mandate. (Note: The exception to this will be a pipeline transaction for which pre-transaction notification has already been sent to the cardholder, but the debit has not been communicated to or received by the cardholder, and the e-mandate withdrawal happens during the interregnum.) Information about this facility to withdraw e-mandate at any point of time, shall be clearly communicated to the cardholder at the time of registration and later on whenever felt necessary.

16. The withdrawal of any e-mandate by the cardholder shall entail AFA validation by the issuer.

17. In respect of withdrawn e-mandate/s, the acquirers shall ensure that the merchants on-boarded by them, delete all details, including payment instrument information.

Dispute resolution and grievance redressal

18. An appropriate redress system shall be put in place by the issuer to facilitate the cardholder to lodge grievance/s. Card networks shall also put in place dispute resolution mechanism for resolving these disputes with clear Turn Around Time (TAT).

19. The card networks shall make suitable arrangements to separately identify chargebacks / dispute requests in respect of e-mandate based recurring transactions.

20. RBI instructions on limiting liability of customers in unauthorised transactions shall be applicable for such transactions as well.

Miscellaneous

21. It shall be the responsibility of acquirers to ensure compliance by merchants on-boarded by them in respect of all aspects of these instructions.