#QuickExplainer: The New Auto-Debit Rules
Your auto-debit payment for your Netflix subscription might get cancelled from October 1. Here’s what you need to know about it.
As part of the new security feature mandated by the Reserve Bank of India (RBI), banks will be changing the auto-debit payment rules from October 1, 2021. This means that customers who use the auto-debit facility on their debit and credit cards for recurring payments may see some transactions fail from October 1. Several lenders including Axis Bank, and HDFC have already begun informing their customers about the change in the mandate for auto-debit payments.
The new rules were supposed to have been implemented on 31st March, 2021. However, the Central Bank deferred the implementation of new rules on auto-debit by six months. It was done as per the request of banks, customers, and the digital payment companies.
The New Rule
According to the new rule, Addition Factor Authentication (AFA) is mandatory for all transactions below ₹5,000 on debit cards, credit cards, UPI and other Prepaid Payment Instruments (PPI). All Standing Instructions (SI) set up on credit and debit cards — both domestic and international — will be processed only with AFA.
AFA will also be needed for mandate registration, modification, and deletion. This order is applicable to all recurring payments, which were earlier debited automatically from customers’ cards for mobile, utility, other recurring bills and subscription payments such as OTT streaming services. SI given on Netflix, Amazon, insurance payments will be deactivated from October 1 while SI registered using bank accounts for mutual funds, SIPs, EMIs will continue.
How Will This Work?
Banks will send a notification to a customer through SMS and email before the transaction. Customers will be notified by lenders 24 hours before a mandate will be debited. This will provide customers enough time to alter or cancel a payment. This notification will consist of details about the name of the merchant, transaction amount, date of debit, reference number of the transaction, and the reason for the debit.
The cardholder will have the option to either disapprove or approve the transaction. The customer should also make sure that their correct mobile number is linked with their debit/credit cards so that they can receive a notification for approval.
Banks & Their Struggle
Despite getting a six-months extension from the Central Bank, banks are still struggling to meet the deadline. Several lenders are finding it difficult to upgrade their system and payment aggregators are unable to integrate with them. Experts tracking the matter told India Today, banks are the main reason behind the delay, and have begun notifying customers about the rule change very late.
Since the upgrading has not been done by many banks yet, they feel that the new rules could lead to problems for millions of users. But how? A large number of credit and debit card users have set auto payment instructions for goods and services ranging from electricity and gas to movie and music subscriptions. Since the banks haven’t set up the system yet, all these people will struggle while making their payments.
In The End
These new rules are supposed to provide more protection to customers when they are doing transactions. But it might cause some discomfort due to the unpreparedness by the banks. Some banks have even advised customers to make direct payment for SIs as the old facility may not work initially. While major private lenders said they are ready to abide with the RBI’s guidelines, some initial disturbances are expected. We have to wait and see how the implementation of these new rules affects customers and will RBI grant another extension to the lenders…