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RBI’s new auto debit rules are here. Know how they will affect customers

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As per new RBI norms, customer’s pre-approval will now be required for recurring payments

With effect from October 1, all types of recurring or repetitive payments, especially made through credit and debit cards and which are of value of Rs 5,000 and above, shall be notified to the customer by a notification 24 hours before the prescribed payment. being informed. .

The advanced notification is for seeking subsequent approval to carry forward any such transactions, as per the new norms notified by the Reserve Bank of India (RBI) to customers being sent by banks to execute recurring payments.

If the consent of the customer is not obtained, such transactions will not be executed. Under this new arrangement, banks will send a One Time Password (OTP) to the customers for any transaction above Rs 5,000. Recurring transactions on customer’s credit or debit cards, which do not comply with this new rule, will now be rejected by the banks, as the system has now come into effect from October 1, 2021.

In other words, as per the new guidelines of the central bank, only those transactions in which customers have e-mandate will be executed successfully.

Steps needed:

The new rules are designed to protect customers from online frauds, especially on third party platforms, where it has been observed that the chances of payment fraud are high. Hence by introducing a kind of e-mandate, RBI wants to provide more control to customers while making recurring payments using credit or debit cards.

Thus the customer will now be able to book and decide the amount in advance for such recurring transactions. Also they will be able to cancel any such service offered by the banks with the help of apps.

Such transactions are likely to be affected by:

Auto debit or auto credit mandates such as payment for insurance premiums, renewal of membership with top or OTT platforms, ordering food using e-commerce websites, utility service providers and other such transactions are going to be affected the most. . RBI’s new guidelines

Though many banks are yet to implement their e-mandate process and it may take some time, the new system is likely to create some confusion among lakhs of customers who are transacting through debit and credit cards. and execute such recurring payments. Regular basis.

However, recurring payments below Rs 5,000 will not be affected by the new RBI guidelines.

impact on customers

Since all types of recurring payments of Rs 5,000 and above are being made prior to a notification 24 hours before the customer, these will happen only if the customer authenticates them through OTP mode.

To explain the process a bit, while till now customers could execute recurring transactions using their debit or credit cards, from October 1, all such recurring payments through the card would be done through the issuing bank.

In other words, customers will need to re-register themselves with each of their payment instruments, be it debit or credit cards. Once this is done, the first recurring transaction will have to be conducted through an Addition Factor Authentication (AFA) system, i.e. through advance approval of such auto-debit requests, the value of which exceeds Rs 5,000.

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