Auto payments for bills, subscriptions may be disrupted from April 1; here's why

Auto payments for bills, subscriptions may be disrupted from April 1; here's why

As per a new RBI rule, automatic payments will have to undergo additional authentication; while the new rule comes into effect from April 1, uncertainties around it could create problems for users

Expect problems with automatic payments Expect problems with automatic payments

Regular automatic payments from your bank account are likely to experience some disruption from April 1, 2021 due to a Reserve Bank of India (RBI) rule on recurring transactions. This might affect automatic payments for mobile, utility or other bills, as well as subscription charges for OTT platforms, rental services, etc. The new rule calls for an additional layer of authentication for recurring transactions via credit cards, debit cards, UPI, and other prepaid payment instruments (PPIs) including digital wallets.

The central bank had issued a notification, dated August 21, 2019, to inform all scheduled commercial banks, non-bank prepaid payment instrument issuers, card payment networks and the National Payments Corporation of India (NPCI) about the same.

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What does the new RBI rule say

In its notification, RBI said it "has been receiving requests from industry stakeholders to allow processing of e-mandate on cards for recurring transactions with AFA during e-mandate registration and first transaction, and simple / automatic subsequent successive transactions." To balance users' safety and convenience, the central bank said it has agreed to this proposal.

As per the RBI notification, automatic transactions will have to go through Additional Factor of Authentication (AFA) for the first transaction, as well as subsequent successive transactions, subject to certain conditions. It means such recurring transactions will have to be manually authenticated via a one-time password (OTP), at least when they are being set up.

Transaction limit under the new rule

Originally, the RBI had allowed transactions up to Rs 2,000 to be exempted from e-mandate based recurring transactions without AFA. However, in a notification on December 4, 2020, this limit was extended to Rs 5,000. Recurring transactions above this limit will have to undergo additional authentication.

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When does the new rule come into effect

In its December notification, the RBI directed for implementation of the new rule from April 1, 2021. "Processing of recurring transactions (domestic or cross-border) using cards / PPIs / UPI under arrangements / practices not compliant with the aforesaid instructions shall not be continued beyond March 31, 2021," the central bank had said.

How does it work

Banks and payment platforms will have to send a notification to the customer 24 hours before the first automatic payment is debited. The mode of communication will have to be selected at the time of registering the e-mandate for recurring transactions. The notification will ask for customer's consent to complete the payment. Subsequent payments may be completed without this step.

Will there be any effect on automatic transactions

Banks and payments platforms are yet to clarify if they are ready to implement this new rule. Banks might decline automatic payments, which means customers will have to manually pay their bills. Enterprises that extensively use automatic payments will also be affected. Meanwhile, third-party payment processors have refused to share customers' data with banks citing contractual agreements, which could complicate matters further.

Till these issues are resolved, customers might face problems with recurring transactions from their accounts.

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