Did RBI Rule ‘Kill’ Recurring Payments in India?

Earlier this month, the Reserve Bank of India (RBI) established a rule governing how businesses can process recurring payments.

In doing so, it “effectively killed all recurring payments” in the country, according to an editorial published Sunday (Oct. 17) in the Indian business website The Ken.

The bank’s ruling requires customers making transactions up to 5,000 rupees (about $67) to undergo an additional factor of authentication and a one-time registration. Transactions higher than 5,000 rupees requires customers to authenticate every transaction each month, 24 hours prior to the transactions. For businesses and consumers, “it felt like an obstacle course,” The Ken’s Praveen Gopal Krishnan wrote.

“In one swift move, the RBI effectively killed all recurring payments in India,” he wrote. “And it was done not by an explicit ban, but by adding layers of consent on top of it, which added friction.”

The piece profiles Mehul Mohan, the 22-year-old CEO and Co-Founder of codedamn, which teaches developers programming.

His company offers a subscription product to teach coding, and he said business has been hurt by the new RBI rule, according to the report.

“We’ve lost about 60% active Indian subscriptions on codedamn,” Mohan told The Ken. “Cards just stopped working.”

First introduced in 2019, the directive was scheduled to go into effect in April but was delayed when banks said they were not prepared to comply.

Read more: India’s New Payment Rules Prompt Big Tech Warnings

The RBI has said the framework is designed to create “a risk mitigant and customer facilitation measure.” Issuers processing such transactions are to “send a pre-transaction notification to the customer, at least 24 hours prior to the actual charge by SMS or email, as per the customer’s preferences.”

Earlier this month, several companies, Google, PayPal and Sony among them, sent reminders to their customers and business partners about the directive. Apple wrote to developers cautioning “some transactions that don’t meet these requirements will be declined by banks or card issuers.”