Auto-debit mandates for utility bills and payments for subscriptions are likely to get stuck under the new regime Come October, and your auto-debit mandates for payments of utility bills, insurance premiums, subscriptions to online services and credit card bills may not go through.
According to the Reserve Bank of India’s (RBI’s) new guidelines, customers are required to carry additional factor authentication (AFA) on all recurring payments done through their debit cards, credit cards, UPI and prepaid payments instruments (PPIs). This rule will kick in from 1 October.
“RBI has mandated all banks to comply with the guidelines and directed issuer banks to notify their customers about the changed rules and what they need to do," said Shashank Kumar, co-founder, Razorpay.
With the deadline nearing, banks have started intimating customers. “Dear customer, from 1 October 2021, auto debit payments for recurring transactions, non-compliant with the new regulatory guidelines, will not be honoured on your ICICI Bank credit or debit card, and payments will have to be made directly on the merchant website/app," ICICI Bank wrote in a message sent to customers’ phones.
This is what you should do to avoid defaulting on recurring transactions.
Additional Factor Authentication (AFA): Some major private banks and big merchants have already integrated the technology infrastructure needed to comply with RBI’s new guidelines.
If your bank has communicated this with you, you should visit its website on 1 October, check the list of merchants that the bank has enabled for AFA and register afresh with each merchant whose service you use to permit them to continue charging your card for recurring payments.
At the time of registration, you also need to key in the validity period and maximum amount of the standing instruction. Any payment request beyond the maximum amount will need one-time-password (OTP) based authentication at the time of transaction.
AFA is a one-time process for transactions below ₹5,000. “AFA is same as approval using OTP at the time of registration. If the amount involved is less than ₹5,000, one-time authentication is enough," said Ashish Goyal, member, Fintech Association of Customer Empowerment (FACE) and co-founder and chief financial officer, EarlySalary.
For subsequent transactions within this threshold, your bank will send you a debit notification with the amount and name of the merchant 24 hours before each payment. The notification will also contain a link that will direct you to a page that will allow you to view, modify or cancel the payment or the mandate. If you take no action on the notification, the transaction will be carried out.
For payments above ₹5,000, you will need to approve each transaction with an OTP sent from the bank.
Banks will send all the correspondence on your registered phone number and email ID. Therefore, you must ensure that your correct details are linked to your cards.
If bank is not compliant: Customers who still haven’t received any update from their banks about the change must make direct payments to service providers through merchants’ apps, websites or their bank’s net-banking facility to avoid defaulting on payments.
Also, it is not enough that your banks are ready to comply with the new regulation.
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