From October 1, some auto-debit transactions from cards may fail. Check details

auto-debit payment rules from October 1

Customers who use the auto-debit facility on their debit and credit cards for recurring payments may see some transactions fail from October 1. This is due to a rule mandated by the Reserve Bank of India (RBI).

Banks and other financial institutions will have to ask customers for additional factor authentication for auto-debit payments above Rs 5,000. As per the new rule, banks and financial institutions are required to send a notification to customers at least 24 hours before a recurring payment is deducted.

The transaction will be allowed only if the customer approves the request.

Watch | Why are OTT platforms fearing RBI’s new auto-debit rules?

WHAT IS THE PROCESS?

Banks will send a notification to a customer via SMS and email before the transaction. The notification will contain details about the name of the merchant, transaction amount, date of debit, reference number of transaction and the reason for the debit.

The cardholder will have the option to either disapprove or approve the transaction. The rule was introduced by the RBI to make the auto-debit process secure and provide more flexibility to customers.

A customer should ensure that the correct mobile number is linked to the debit/credit cards. Otherwise, the customer may not receive the message for additional authentication.

Many banks including HDFC have already started informing their customers about the change in the mandate for auto-debit payments.

It may be noted that the new mandate will have no impact on mutual fund SIP, insurance premiums and other types of recurring payments above Rs 5,000 if the standing instruction for auto-debit is from your bank account.

The rule was supposed to come into effect from April 1, 2021 but the deadline was extended by the RBI as many banks had not complied with the rule. At the time, RBI had extended the deadline by six months to September 30, 2021. This means the new rule comes into effect from October 1, 2021.

Read | Debit, credit card automatic payment rule to change: All you need to know

Banks that fail to follow the norms in future could face stringent action, as per the RBI’s circular dated March 31, 2021.

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