e-Mandate - What is eMandate and How Does It Work?

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E-mandate is an electronic payment system introduced by the National Payments Corporation of India (NPCI) in accordance with RBI guidelines. This innovative platform serves as a fundamental framework for both Indian customers and companies. e-Mandate enables efficient handling of recurring payments with minimal human intervention.

It enables auto-debit from your account via e-mandate, meaning you give standing instructions to your bank and other financial institutions. As per your instructions, they will auto-debit a specific amount at predetermined frequencies and duration from your account.

This convenient process ensures timely payouts without any delays or missed payments. You can easily manage recurring payments, such as insurance premiums, SIP investments, loan EMIs, etc., without the hassle of scheduling payment reminders or penalty charges.

Until recently, the mandate was only available offline, but the online process has proved more convenient for customers. Read on to know the advantages of e-mandate, its eligibility criteria and more.

What are the Advantages of an e-Mandate?

Since its inception, e-mandate has onboarded over 30 banks, offering real-time authorisation confirmation. It has also helped multiple industries in adopting the recurring payment business model. Here are some of the top benefits of e-mandate:

1. Streamlines Cash Flow Processes

e-mandate payment processes provide flexibility to businesses and customers.

Businesses can ensure a steady cash flow by automating payment deductions. On the other hand, customers experience reduced friction in making payments due to automatic deductions.

As such, it allows businesses to hold certain debits and customers to block any unwanted payments, empowering both parties to manage cash flow efficiently.

2. Attracts and Retains Customers

e-mandate improves cash flow and reduces the need to pursue defaulting customers. This helps companies concentrate on existing customer relationships and attract new customers. The convenience of one-time digital authentication helps avoid interactions with collecting agents.

This promotes loyalty and increases customer retention and attraction.

3. Promotes Transparency

Since all e-mandate-based transactions are online, they offer more transparency between businesses and customers. Furthermore, with no additional and hidden charges included, companies experience enhanced credibility.

4. Auto-Reconciliation Supports Business Growth

With auto-reconciliation, businesses do not have to invest in additional tools to keep track of payments. They can track all the details of the debits and credits online on the e-mandate platform. This helps save costs, provides reinvestment opportunities and improves customer service.

5. Straightforward Registration Process

Registering for e-mandate is a highly efficient one-time process, and you only need your bank and card details to register. With one-time registration, you can easily set up recurring payments with your chosen merchant.

These advantages of e-mandate allow businesses to flourish without the hindrance of diverting additional resources to recover payments. It also helps customers avoid falling into debt cycles.

Eligibility for an e-Mandate

Before proceeding with the e-mandate process, ensure you meet the following requirements:

You must have an Aadhaar card
You must have a bank account with a bank that supports e-mandate
Your chosen financial institution must be registered to offer NACH services
Your mobile number must be linked with your Aadhaar card and your bank account

Check out the documents that you need to submit for setting up an e-mandate.

A filled e-Mandate form
An Aadhaar card
A bank account
A mobile number linked to your bank account and Aadhaar card

Your e-Mandate application can get rejected for the following reasons. Prepare for it beforehand to avoid facing rejection in the future.

Bank doesn’t provide NACH services
Incorrect account details entered
Wrong folio number or linked information

Thoroughly understanding the e-mandate process before initiating can help you avoid unexpected rejection, which may delay your transactions and pose additional trouble.

Types of e-Mandates

Now that you know what is an e-mandate, you can now learn about the different types. e-mandates are classified into two categories, depending on the nature of the transaction. Here is a look into these:

1. Debit e-Mandate

When approved, a debit e-mandate allows banks or merchants to deduct the agreed amount from your account. This can be for EMIs, insurance premiums, SIPs, etc.

Suppose you have a home loan with a monthly EMI of ₹16,000, due on the 5th of every month. By authorising an e-mandate, you will allow the bank to debit the amount on the fixed date automatically.

This ensures timely payments and protects from late payment penalties and charges.

2. Credit e-Mandate

With credit e-mandate, the amount is auto-credited into your account. Businesses can benefit from this in receiving payment from business partners. Additionally, you can allow payments to get deposited into your bank account, such as insurance claim amount, FD monthly interest, loan amount, etc.

Industries or Firms that have Adopted e-Mandates

Many industries have adopted e-mandate to improve the efficiency of their payments. Here are some of them:

1. Lending Companies

With the introduction of e-mandate, lending companies are now more proficient in distributing loans and collecting repayments. Lenders do not rely on reminders. Instead, they can auto-deduct the payments from your account.

Borrowers also benefit from it since they do not have to keep track of upcoming payments. This protects them from missed EMI payments and incurring penalties.

2. Wealth Management Industry

Since the introduction of e-Mandate, the wealth management industry witnessed major growth. This is because customers can now make recurring payments for their investments faster without delays and missing out on the opportunity.

AMCs can easily make deductions from the bank account to invest towards the financial goal on your behalf.

3. Insurance Industry

The insurance industry has twofold advantages from the e-Mandate; in collecting insurance premiums and building customer relationships. Insurance companies can now collect premiums on time from their customers and track them easily.

Secondly, the insurance claim gets transferred quickly, which builds the trust of customers and attracts more customers.

What is the limit of e-mandates that I can set up through a single bank account?

There are no limitations on the number of e-mandates that you can set up through a single bank account.

What will happen if there is an insufficient balance in the bank account?

If there is insufficient balance in the bank account, the transaction will fail, and you may need to pay additional penalty charges.

How much time is needed in an e-mandate process?

It can take from 2 to 21 days to complete the e-mandate process.

How is an e-mandate different from an ECS mandate?

While e-mandates are an online auto-debit process, an ECS mandate requires offline intervention by physically submitting the documents, etc.

Is there any difference between e-mandate and ECS mandate?

e-mandate and ECS mandate have some significant differences between them. An ECS mandate is an offline process, while an e-mandate is an online process. Also, e-mandates are more convenient as you can register from anywhere.

It also takes less time and cost as compared to the ECS mandate.