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Updated on: Friday, October 01, 2021, 09:46 AM IST

Auto-debit payments change from October 1: All you need to know

The RBI has come out with these rules to make the auto-debit process secure and provide more flexibility to customers |

The RBI has come out with these rules to make the auto-debit process secure and provide more flexibility to customers |

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Bank customers would be receiving this SMS from their banks. It reads:

Dear Customer, from 01-Oct-21, Auto Debit payments for recurring transactions, non-compliant with the new regulatory guidelines, will not be honoured on your XXX Bank Credit or Debit Card and payments will have to be made directly on the merchant website/app. For merchants routing the recurring transaction through a compliant process, XXX Bank will send a pre-debit notification and an additional authentication through an OTP will be required for bill amounts greater than Rs 5,000.

Or

As per RBI’s recurring payment guidelines, w.e.f. 20-09-21, standing instructions on your xxxxxxx Bank card(s) for recurring transactions will not be honoured. You can pay the merchant directly using your card for uninterrupted service...

Or

As per RBI’s recurring payment guidelines, w.e.f. 20-09-21, Standing Instructions on your XXX Bank Card(s) for recurring transactions will not be honoured. You can pay the merchant directly using your card for uninterrupted service..

RBI's AFA rules

The RBI has come out with these rules to make the auto-debit process secure and provide more flexibility to customers.

The additional factor authentication (AFA) rules of the Reserve Bank of India (RBI) will be implemented from October 1.

The transaction will not be completed if customers do not approve or reply to the pre-debit notification.

Banks are required to send a notification 24 hours before the payment due date. Customers will have the opportunity to modify or cancel the payment. They also have the liberty or facility to cancel, view, or modify any standing instructions set on their card.

The new rule will not impact e-NACH and UPI autopay transactions.

Rules extended till September 30

The rules were to come into force from 1 April 2021, but the RBI extended it for 6 months as many banks had not complied with the rule.

Auto Debit Payments

All recurring transactions will need additional authentication. This will apply to credit and debit cards, both domestic and international. For payments exceeding Rs 5,000, a one-time password (OTP) will have to be validated by a customer each time a payment is due.

The AFA rules will be applicable on auto payments linked to debit cards, credit cards, prepaid cards. The new rules are also necessary for all auto-debits below Rs 5,000.

Any payment request beyond the maximum amount will need OTP-based authentication at the time of transaction.

As per the AFA rules, auto debit payment will be done only after the customer’s approval.

Customers will receive a pre-debit notification 24 hours prior to the debit. This notification can be an SMS or e-mail.

For each Standing Instructions (SI) feature, customers can set a maximum amount. If the transaction amount is bigger than the maximum amount then, the pre-debit notification will have a link for the bank customer to authenticate the transactions along with AFA. However, without this authentication, the transaction will not be processed further.

What can the customer do if they want to continue using the services they have subscribed to?

Customers may continue to enjoy uninterrupted service through one of the following ways. Here is what ICICI Bank has said on its website:

a. Customers will have to check the bank website on/after October 1, 2021 to see the list of merchants that are enabled as per the new regulatory guideline. Customers need to register again for each service, if the standing instruction has not been migrated already, to permit merchants to charge customers’ card for recurring payments.

b. If merchantsare not enabled as per the new regulatory guideline, customer will have to make direct payment to the merchant to enjoy the services.

Will the customers have to pay charges if the recurring payment transaction gets declined due to non-complaint process?

The bank will not levy any charges. However, in the event of merchant/service providers levy any charges/fees towards the non/delayed payments, bank will not be responsible for the same.

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Published on: Friday, October 01, 2021, 09:46 AM IST
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