Your auto-debit from debit/credit card may fail from next month if not approved

Your auto-debit from debit/credit card may fail from next month if not approved

Do you use your debit/credit card or mobile wallet for recurring auto-debit payments? If yes, then you should know that from October 1 onwards, as mandated by the Reserve Bank of India (RBI), banks and other financial institutions will have to ask customers to provide additional factor authentication if the auto-debit mandate for the payment is above Rs 5,000.

With effect from October 1, 2021, under the new additional factor authentication rules, a bank is required to send a notification to the customer at least 24 hours before the auto-debit payment is to be deducted and allow the debit only after the customer has confirmed it. The pre-transaction notification will be sent via SMS, email etc. The notification will inform the cardholder about the name of the merchant, transaction amount, date/time of debit, reference number of transaction/ e-mandate, reason for debit, i.e., e-mandate registered by the cardholder. The cardholder shall have the facility to opt-out of that particular transaction or the e-mandate.

You should ensure that your correct mobile number is linked with your debit/credit cards so that you can receive notification for approval

However, note that there will be no impact of the new rule on your mutual fund SIP, insurance premiums and other recurring payments if the standing instruction for auto-debit is from your bank account.

What kind of payments will it impact?

This new rule will impact users who have given auto-debit mandates for recurring payments from their debit/credit cards and/or mobile wallets for payments such as subscription to OTT platforms such as Netflix, Amazon Prime, music apps like Spotify, Apple Music, payment of mobile bills, insurance premium, utility bills etc.

Do keep in mind that additional factor authentication will be required for recurring transactions and not for ‘once-only’ payments. The standing instructions must be for payment from your debit/credit card. For instance, up till now Netflix asks you to provide your debit/credit card details against which subscription fee is debited on the 8th of every month.

As mentioned above, the additional factor authentication does not apply for auto-debit transactions below Rs 5,000. Any recurring payment exceeding Rs 5,000 will require approval from the customer before it is charged to his/her debit card/wallet and debited from the bank account/wallet.

Extended deadline for banks

The additional factor authentication for the above-mentioned payments was supposed to come into effect from April 1, 2021. However, since many big banks such as HDFC Bank, ICICI Bank, State Bank of India (SBI) had not complied with the norm, the RBI extended the date by six months. Thus, new rule will now come into effect from October 1, 2021.

The Central Bank in its circular dated March 31, 2021, said that any further delay in ensuring complete adherence to the framework beyond the extended timeline will attract stringent supervisory action.

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