Effective October 1, new auto-debit rules have come into effect that will impact some periodic card-based {debit cards, credit cards, Unified Payments Interface (UPI) or other prepaid payment instruments (PPIs)} payments of customers.
This means if you have been buying anything or making any subscription payments through a recurring charge to your card, the payment will likely fail to go through.
Although OTT subscriptions, utility bills, etc. can be paid for through alternatives, insurance payments may be missed due to the rule change which could result in lapsed coverage.
The rule change, mandated by the Reserve Bank of India (RBI), will affect auto-debit, chequebook and debit card payments.
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Meanwhile, Banks, merchants and payment aggregators, scrambling to comply with the new rules, have already started notifying customers.
On December 4, the RBI had directed all banks and payment gateways that the processing of recurring transactions (domestic or cross-border) using cards or Prepaid Payment Instruments (PPIs) or Unified Payments Interface (UPI) under arrangements/practices not compliant with the additional factor of authentication (AFA) would not be continued beyond March 31, 2021.
As part of risk mitigation measures, the central bank announced this step to bolster the safety and security of card transactions.
However, the non-readiness of some of the players forced the RBI to extend the deadline on recurring payments such as utility bills, recharge of phone, DTH and OTT, among others, till September 30.
Under the new norms, banks have to inform customers in advance about recurring payments due, and transactions will proceed following a nod from the customer. So, the transaction would not be automatic but done after authentication from the customer.
For recurring payments above Rs 5,000, banks will have to send a one-time password to customers as per the new guidelines.
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Most banks, including the State Bank of India (SBI), have informed their customers about the new rules.
HDFC Bank, in a bulk message to its customers, said as per RBI guidelines on e-Mandate on cards, the bank will decline non-compliant recurring transactions at merchant web or app on your Credit/Debit Card from October 1, 2021.
"Alternate Solution - Retry regular payment on Merchant Web/App authenticated via OTP or Pay via AutoPay in BillPay on our NetBanking for your Electricity /Water/Gas/ Landline/Postpaid mobile/Broadband/Insurance billers," the message said.
In August 2019, the RBI had issued a framework for processing e-mandates on recurring online transactions.
Initially applicable to cards and wallets, the framework was extended in January 2020 to cover Unified Payments Interface (UPI) transactions as well.
The RBI had said the requirement of AFA has made digital payments in India safe and secure, and the primary objective of the framework was to protect customers from fraudulent transactions and enhance customer convenience.
In the interest of customer convenience and safety in the use of recurring online payments, the framework mandated use of AFA during registration and first transaction (with relaxation for subsequent transactions up to a limit of Rs 2,000, since enhanced to Rs 5,000), as well as pre-transaction notification, facility to withdraw the mandate, etc.