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New auto-debit rules from October 1: Here's what you need to know

Those who use auto-debit facility to pay recurring bills or EMIs from their bank accounts may have to process some of these transactions manually come October 1, 2021, due to new security features mandated by the Reserve Bank of India (RBI).

Several banks have already warned

their customers that they might see some of the transactions fail as some payment service providers are yet to be compliant with the new RBI rules. RBI’s framework for processing of e-mandates for recurring online transactions were due to become effective March 2021, but deferred till October 1, 2021, as several stakeholders requested more time to comply.

HDFC Bank notified its customers earlier that “effective October 1, 2021, it will not approve any standing instruction (e-Mandate for processing of recurring payments) given at merchant website, app, on HDFC Bank credit or debit card, unless it is as per RBI complaint process”.

It also said that such automated payments will only go through for stakeholders that have completed the development, integration and adoption of a common RBI-compliant industry-wide platform for same by the deadline.

“The new conditions prescribed by RBI require a cohesive effort by all stakeholders, including Card Issuing banks, Merchant Acquiring Banks, Card Networks and Merchants. All constituents must complete the development, integration and deployment of a common platform fully compliant with the RBI guidelines. A common industry-wide platform is being developed, and HDFC Bank has completed its internal development and integration. We are now working jointly with merchants to make this platform live for customers at the earliest,” said HDFC in an email to its customers earlier. 

Axis Bank also informed its customers about the change in rules for recurring automated payments.

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

Balancing safety, security and convenience of recurring payments

E-mandate, the digital payment infrastructure introduced by RBI and National Payment Corporation of India (NCPI) in 2018, are standing instructions that allows corporates to collect payments from customers without human intervention. It is through this framework that your bank processes requests for auto-debit whether it is for mutual fund SIPs, newspaper subscriptions, EMIs for loans etc.

The new rules refer to the framework set up by the central bank for registering e-mandates for recurring online transactions using cards, wallets, and Unified Payments Interface (UPI). For all transactions below Rs 5,000, central banks has introduced Additional Factor of Authentication (AFA) for cards, wallets and UPI.

Banks will send a pre-debit message or email to customers at least 24 hours prior to the payment giving time to customers to cancel if they like. Also, automated payments above Rs 5,000 will need to be authenticated by the customer manually via a one-time password (OTP).

The pre-transaction notification will inform cardholder about the name of the merchant, transaction amount, date, time of debit, reference number of transaction, e-mandate, the reason for debit, i.e., e-mandate registered by the cardholder. 



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