With the National Payments Corporation of India (NPCI) decision to suspend eSign-based eMandate coming into effect from today, the operational costs of digital lenders are set to increase. These lenders will now not be able to use a paperless model for automated collection of loan payments. A NPCI circular dated November 23, 2018 had said "eSign based E-Mandate product be suspended with effect from November 26, 2018." 

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The NPCI decision came after fintech companies had already taken a hit post the Supreme Court decision banning Aadhaar-based eKYC process. The decision, however, was taken by the NPCI to make itself compliant with the top court's Aadhaar verdict. 

Varun Burman, founder, Yoekisoft Solutions, told Zeebiz.com, "I would say it would affect the industry adversely as the alternatives to Enach are costly options like physical NACH due to high rejection and procurement cost. The other options suggested by NPCI for e-mandate are at least 6 months from effective utilisation by the industry."

"Finance industry companies like NBFCs, insurance, mutual funds, capital market and also utilities companies like electricity company and telephone company use NACH. All these will be affected. NBFC companies will be affected most," he added.

eMandate (Digital Mandate) is one of the initiatives by the Government of India to modernize the Indian economy. According to signdesk.com, a mandate is basically "a standard instruction that you provide to your bank or other institutions like your phone service provider to automatically debit the instructed amount from your bank account." eSign based eMandate made the entire process easier and fast. eNACH or eMandate helped the banks, other financial institutions and other government bodies to provide automated payment services.

Alternatives 

According to Burman, there are two options: Physical NACH and E-mandate on the basis of internet banking and debit card pin (but this option is not fully operational)

Burman said Yoekisoft Solutions' Zipnach is also an option for the entire finance industry. "We feel ZipNACH is the option for every player in the finance industry. Since we offer solution for physical NACH which is the only hope for the industry till mandate become fully live."

"The eNACH suspension is a setback to the entire finance industry as this impacts the go digital initiative by the government, but having said that the aadhar verdict by SC is a right step towards protection of data and privacy. The preparedness of any entity to handle such changes shows the adaptability. ZipNACH is powered by all tools today's to help the industry adapt."