To bolster the safety and security of card transactions, the Reserve Bank of India (RBI) has mandated new auto-debit rules for debit and credit card payments which came into effect on 1 October 2021. RBI’s directive states that there will be no automatic recurring payment for various services including utility bills, DTH, OTT, and recharge of phone among others.
What changes for the customers?
Under the new norms, banks will be required to inform customers in advance about recurring payments due and transactions would be carried following a nod from the customer. So the transaction would not be automatic but would be done after authentication from the customer.
Customers need only go through the process of registration once under this new mandate and it is only the initial transaction that needs the additional factor of authentication (AFA). After the first time, customers can perform other future transactions without the AFA. In fact, while registering, customers can provide the validity period for future transactions.
OTP for payments above Rs 5,000
For recurring payments above Rs 5,000, banks are required to send a one-time password (OTP) to customers as per the new guidelines.
Most of the banks including State Bank of India (SBI), Axis Bank, HDFC Bank and ICICI Bank have informed their customers about the new rules.
Choose to opt-out
Customers can now even choose to opt-out of a particular transaction or mandate via the link provided in the pre-debit notification.
No impact on these auto-debits
Any standing instructions registered using bank accounts for mutual funds, SIPs, equated monthly instalments for loans will not be impacted by these new rules.
In August 2019, the Reserve Bank of India (RBI) had issued a framework for the processing of e-mandates on recurring online transactions.