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As per the new rules by the RBI, recurring or automatic payments using credit cards, debit cards, unified payments interface (UPI), or any other forms of prepaid payment instruments (PPIs) such as wallets are likely to be changed from 1st April 2021. The Reserve Bank of India (RBI) earlier stated that recurring payments using these resources could be stopped and will need mandatory added factor authentication (AFA) from this month.
Under the new rules, the processing of recurring transactions from banks, NBFCs, and payment gateways not implementing additional factor authentication (AFA) would not continue beyond 31st March 2021. Banks should also notify customers in advance about recurring payment due, and transactions would be accepted following confirmation from the customer.
This rule is expected to affect the monthly payments of various utility bills, subscription charges for diverse streaming platforms comprising Netflix, Disney+ Hotstar, Amazon Prime, as well as mobile and cable bills. This means that if you had agreed to an e-mandate for your mobile bill payment or Amazon Prime monthly subscription fee etc., and it was getting automatically debited from your credit card, the payment will not go through that order from 1st April 2021.
According to a Business Standard report, top banks are already terminating the facility of e-mandates for auto-debit of money from credit and debit cards. Several banks have also sent messages to their customers notifying them that they will have to manually make payments for utility, mobile, and other bills and services. In essence, it means that banks will not deduct the related fees automatically on behalf of the customers. Instead, the customer will have to give permission to their bank before the latter can deduct the charges. Alternately, individuals can choose to make the payment on their own.
The New Rules You Need To Know
Here are the new sets of rules laid down by the RBI for e-mandate on cards for recurring payments.
1. For automatic payments via credit cards, debit cards, or wallets, an added authentication will be needed by the customer from April. If the cardholder chooses to opt for an e-mandate facility on the card, they should go through a one-time registration process and an AFA authentication by the issuer.
2) The upper limit for automatic payments from cards and wallets will be Rs. 5,000. If the transactions are beyond the limit, consumers will be required to use an additional one-time password (OTP).
3) This new rule will be valid for transactions executed using all types of cards such as credit, debit, UPI, PPIs, and wallets, as mentioned by the RBI.
4) The RBI earlier asked the banks to introduce AFA by 31st March 2021, having issued a circular on 4th December 2020. The circular said that recurring transactions (domestic or international) via cards, UPI, and PPIs under the practice not compliant with the directives mentioned above would cease to exist after 31st March 2021.
5) Card issuers and banks will have to send a pre-transaction notice to cardholders at least 24 hours before the actual charge. The customer can choose a mode of receiving pre-transaction notifications, which include SMS, email, etc.
6) Customer approval is mandatory to proceed with the transaction. Customers can also choose to opt-out of a specific transaction.
7) The bank will have to provide the cardholder an online option to pull out any e-mandate at any time. The RBI also stated that no additional charges could be charged or recuperated from the customer for utilizing the e-mandate facility on cards for recurring payments.
8) Banks have already started notifying their customers about the new rules. For example, a communication sent out by Axis Bank went something similar to this: “As per regulatory requirements, processing of e-mandates for recurring transactions that are registered on your card without Additional Factor of Authentication (AFA) will be withdrawn from 1st April 2021. You can make payments straight through your card at the merchant’s website or application.”
Do These New Rules Ensure Safety?
The new guidelines offer safeguards to the customer on several aspects. They offer transparency, as customers will now get the bank’s intimation on the recurring transaction debit 24 hours before the charge. It also provides the customer with the facility to withdraw the e-mandate before the charge. Further, it gives the customers a choice to cancel or opt-out of any e-mandate at any point in time. Additionally, the customers will now be offered a validity period for the e-mandate as it cannot be forever.