Auto-debit rule from October 1: Starting from next month, the auto-payment rules are likely to be changed. The Reserve Bank of India (RBI) earlier stated that recurring transactions using debit cards, credit cards, Unified Payments Interface (UPI), or other prepaid payment instruments (PPIs) will need additional factor authentication (AFA). A large number of credit and debit card users set auto-payment instructions for a number of services ranging from electricity and gas to music and movie subscriptions, and the new rules threatened to spell chaos for millions of users.

According to the new guidelines, card users will now be able to register preferences (opt-in or opt-out of services, spend limits, etc.) for international transactions, online transactions as well as contactless card transactions. Hence, debit and credit cards issued by banks will only be enabled for domestic transactions at ATMs and point of sale (PoS) terminals. Banks can deactivate current cards and reissue them based on risk perception. Note that, the RBI’s mandate does not include prepaid cards and gift cards.

Banks have started informing customers about changes in auto-debit transactions as mandated by the Reserve Bank of India (RBI). The changes will come into effect from October 1

It quoted a communication from Axis Bank, which said, “As per RBI’s recurring payment guidelines, w.e.f. 20-09-21, Standing Instructions on your Axis Bank Card(s) for recurring transactions will not be honored. You can pay the merchant directly using your card for uninterrupted service.”

In April, the RBI deferred new rules on automatic debit by six months. It was done at the request of banks, customers, and the digital payment companies, which said they were unprepared for the March 31 deadline.

Changes That Will Come Into Effect From October 1: Auto-debit rule from October 1

  • Once the new rules come into effect, recurring transactions based on standing instructions given to the merchants by the cardholders will be brought within the ambit of Additional Factor of Authentication (AFA).
  • Customers will need an additional authentication for all recurring transactions.
  • An additional one-time password (OTP) will be required for transactions above ₹ 5,000  to ensure that payments are authorized.
  • A pre-transaction notification will be sent to the cardholder at least 24 hours prior to the actual charge/debit to the card.
  • On receipt of the pre-transaction notification, the cardholder shall have the facility to opt-out of that particular transaction or the e-mandate.
  • The cardholder shall be given the facility to choose a mode among available options (SMS, email, etc.) for receiving the pre-transaction notification from the issuer in a clear, unambiguous manner and in an understandable language.
  • The facility for changing this mode of receiving pre-transaction notification shall also be provided to the cardholder.
  • This new rule will be applicable for all transactions performed using debit and credit cards.