The NPCI has issued a circular which announces the suspension of eKYC-based eMandate used by the digital lenders across the nation for automated loan collection.
This is expected to create operational hurdles in loan collection through paperless mode as used by digital lenders.
The reason for the suspension of the eMandate is Supreme Court's verdict which curbs all Aadhaar-based eKYC processes.
"Digital lending industry seems to be moving in the reverse gear. First, it was the eKYC issue, then liquidity issue and now eNACH is getting blocked. Time to re-imagine business models considering consumer demand for credit is strong," said PayU India MD, Jitendra Gupta in a tweet.
eSign has been successfully used for eNACH (Electronic-National Automated Clearing House) which is linked with UIDAI to obtain authentications to sign the transactions.
NPCI has stated that although suspension of eMandate would cause disruption of the fintech industry, it was something that had to be followed after Supreme Court's ruling on the eKYC matter, according to media reports.
"The corporates/banks can present transactions till February 15, 2019 on the approved mandates, however, they should work in parallel to replace the eSign mandate with either physical mandate or other variants of eMandate as may be offered by the customer's bank," mentioned the NPCI circular.
The NPCI has proposed consultation with government and UIDAI to find an appropriate solution as eSign functionality remains suspended.