Changes to the auto debit rule enforced by the Reserve Bank of India (RBI) will take effect on October 1. Customers who use their debit card for recurring transactions will benefit the most from the adjustment. All standing instructions on cards will be ignored after the revisions.
What will the modifications entail?
All recurring transactions will require additional authentication under the new regulations. Customers will be required to authenticate a one-time password (OTP) each time a payment is due for amounts more than Rs. 5,000.
This will apply to all domestic and international credit and debit cards.
What should consumers do to avoid missing payments on regular transactions?
According to sources, banks have begun warning customers about the changes, and some have even enabled additional factor verification for a few merchants. As per a report, a list of these merchants would be published on the individual bank’s website.
Transactions for merchants who are already connected to the technical infrastructure will be permitted. Users will, however, be required to specify or complete a registration process in which they will be required to enter the validity time and maximum amount of the standing instruction.
At the moment of the transaction, any payment request above the maximum amount will require OTP-based authentication. For transactions under Rs. 5,000, the AFA has been approved.
The authorising bank will send a user a debit notification with the amount and name of the merchant 24 hours before each payment for subsequent transactions within this threshold. In addition, the message will include a link that will take them to a page where they can examine, change, or cancel the payment or obligation. The transaction will be completed if they do not respond to the notification.
If the bank has not informed users about the anticipated changes, they will have to make direct payments to service providers via merchant applications, websites, or their bank’s net-banking facility in order to avoid payment default.
A bit of confusion
Many people use their credit and debit cards to set up automatic payments for products and services ranging from electricity and gas to music and movie subscriptions, and banks are concerned that new laws may cause confusion for millions of people.
For effective payment execution, banks and payment institutions were asked to remodel existing recurring payment flows and preserve standardisation.
All correspondence-related communications will be sent to the users’ registered phone number and email address. As a result, account holders must confirm that their cards are connected to the relevant information.
Frequently Asked Questions (FAQs)
Which transactions are likely to be impacted?
Only transactions in which a user has given their card information for automatic payment will be impacted. The new RBI guidelines will have no effect on e-NACH and UPI AutoPay recurring transactions.
What actions will banks be required to take?
Customers will be notified of the auto-debit transaction 24 hours in advance by all banks. Furthermore, the consumer will be required to validate the transaction in accordance with the new standards.
Will this have an impact on all transactions?
The RBI has capped the auto debit option for transactions up to Rs 5,000 under the new rules. If the monthly auto-debit amount for any service/bill exceeds Rs 5,000, an additional factor of authentication (AFA) will be implemented, requiring the usage of a one-time password (OTP) each time payment is made.