For bank account holders who use their debit/credit card or mobile wallet for recurring auto-debit transactionThere is going to be a change from next month. According to a release issued by reserve Bank of India (RBI), with effect from October 1, 2021, banks and other financial institutions will have to obtain an additional factor authentication from their customers for the auto-debiting facility. This will be applicable on any recurring payment of more than Rs.5,000.
The RBI had initially issued this order in August of 2019 along with a framework for processing e-mandates on recurring online transactions, which at that time was applicable only to cards and wallets. Subsequently, it was extended till January 2020 to cover Unified Payment Interface (UPI) as well. Then in March this year, the apex bank issued an additional order, extending the implementation deadline by six months, making the last date September 30, 2021.
As per the new mandate with effect from the next calendar month, any monthly transaction above the above limit will be subject to additional factor authentication (AFA). This will include payments made through Debit Card, Credit Card, UPI or any other Prepaid Payment Instrument (PPI).
Additionally, banks and financial institutions must send a notification to their customers at least 24 hours before the auto-deductible. Debit will be allowed only after taking the consent of the customers. The pre-transaction notification will be sent through SMS or email and will inform the cardholders like merchant name, transaction amount, date and time of debit, reference number of the transaction and reason for the transaction. Cardholders will have the option to opt out of this process.
Keep in mind that, there will be no impact on your mutual fund SIP, insurance premium or other recurring payments if the standing instruction for auto-debit is from your bank account. However, debit and credit cards will be subject to change in the new rule, so it’s important to keep things updated and make sure the correct mobile numbers and emails are linked to those features.
payments that will be affected
The new rule change will affect users who have to auto-debit payments for things like music apps for OTT platforms such as Netflix, Amazon Prime as well as Apple Music and Spotify. Additionally, it will also be applicable on monthly auto-debit utilities such as mobile recharge bills, insurance premiums, etc. Keep in mind that this is for recurring payments and not a one-time payment authentication scenario. In case of OTT platforms like Netflix, you will need to deal with this additional factor authentication only if the amount payable is more than Rs 5,000 as mentioned above.
Extension of deadline for banks and other financial institutions
As mentioned earlier, the deadline has been extended several times to date. The reason behind this is that several major banks like HDFC Bank, ICICI Bank and State Bank of India (SBI) did not comply with the mandate issued, which forced the RBI to extend the deadline by six months.
“The framework has not been fully implemented even after the extended deadline. This non-compliance has been noted with serious concern and will be dealt with separately. The delay in implementation by some stakeholders has led to potential large-scale customer inconvenience and default. In order to avoid any inconvenience to the customers, the Reserve Bank has decided to extend the time limit for the stakeholders to migrate to the framework by six months i.e. till September 30, 2021. Any further delay in ensuring full adherence to the framework beyond the extended time-frame would attract stringent supervisory action. A circular giving the above advisory is being issued by the Reserve Bank today,” RBI said.
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