The Reserve Bank of India (RBI) has imposed new auto-debit rules started October 1, 2021 to improve the security and safety of card transactions. In accordance with the RBI Directive, there will be no recurring automatic payments for certain services such as utility bills, DTH, phone recharge and OTT, as the Additional Authentication Factor (AFA) has become mandatory .
More about RBI’s auto-debit Rules
- Under the new directive, banks will have to inform customers in advance of recurring payments due.
- Transactions will not be automatic but will be executed after customer authentication.
- You will have to subscribe to a recurring billing mandate and complete an additional factor authentication for auto-debits for any payments upto Rs 5,000. This will be a one-time registration process and further transactions will be completed without additional factor authentication.
- When subscribing to a recurring billing mandate, you can now provide a validity period, which was not previously possible.
- RBI now requires banks to also provide pre-transaction notice to customers at least 24 hours in advance.
- While you did not had this option in the past, you can now also choose to unsubscribe from a certain transaction or authorize via the link provided in the pre-debit message.
Under the new RBI regulations, it is mandatory for banks to send one-time passwords (OTP) to customers for recurring payments over Rs 5,000.
Does RBI’s Auto-Debit Rules Impact EMIs?
Don’t worry about your EMI payments, they are not impacted by RBI’s auto-debit rules. Any of your standing registrations that are recorded using a bank account for mutual funds, SIPs, equal monthly payments for loans, etc. they will not be affected by these new rules. The new rules have come in effect after an increase in customer complaints about third-party apps that continue to bill customer accounts even after customers have opted out.
Objective of RBI’s New Auto-Debit Rules
RBI new rules have made AFA mandatory with the aim of making digital payments in India safe and secure. It also tries to protect customers from fraudulent transactions.
These new RBI regulations aim to bring the required transparency, even if there are short-term restrictions for you. These mandates will also allow you to cancel per-authorization prior to direct debit if you wish.