RBI changes auto-debit rules: All you need to know

The Reserve
Bank of India brought out a new system on October 1, changing the rules regarding recurring
payments, especially the ones made through credit or debit cards. According to the new rules, payments which are of a
greater monetary value than Rs 5,000 will be preceded by a notification, informing
the customer of the scheduled payment 24 hours prior to it being debited.

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The
notification sent by the banks is meant to seek the customer’s approval for
moving forward with any such transaction, according to the new norms put up by the
Reserve Bank of India.

For any
transaction over Rs 5,000 the customers will receive a onetime password (OTP) on their
registered mobile number. If the customer does not agree to move ahead with
the transaction, then the amount will not be debited from their account.

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The
transactions which fail to comply with the set rules will be declined by the
banks. This system has been functioning since October 1, 2021. A customer’s e-mandate has become necessary to make such a transaction successful, as per
the latest guidelines.

However,
recurring payments which amount to less than Rs 5,000 will not be affected.

The
services which will be affected the most include payments of food using
e-commerce websites, renewal of subscription of OTT platforms, utility
providers and insurance premiums as most of these services were reliant on auto
debit or auto credit mandates.

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Although,
several banks are yet to set up the e-mandate process which is bound to take
some time. The new system is expected to cause some confusion amongst the customers
who were heavily dependent upon recurring payments.

The
customers will have to re-register themselves for every payment over Rs 5000
whether it will be transacted from their debit card or credit card.

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Upon
completion, the first repetitive payment will have to done via an additional
factor authentication system.

The new rules
are meant to protect the customers from online frauds. By e-mandates the
customers will be in control of the recurring payments and have greater transparency
in the process.