Auto debit: New system should be simple

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As in transportation, safety and security take precedence over everything comfort and convenience. None would board an aircraft, no matter how comfortable and quick it is if it compromises on safety aspects. Similarly, none would like to undertake any transaction if it is insecure and the system might be exploited by fraudsters. This is precisely the reason why the Reserve Bank of India (RBI) was so keen to ban auto-debit. The central bank also received complaints that some prominent companies have sometimes charged customers for services not rendered and deducted amounts without informing the customers.

According to the guidelines of the central bank, no amount will be automatically deducted through someone’s debit or credit card from October 1, 2021, which is just 48 hours away. In simple words, it would mean amounts that were debited so far without taking the permission of the customer will not be executed anymore. This can pertain to any payment that is done regularly through these cards.

According to the order, all payment aggregators should send an SMS at least five days prior to the customer. If the customer gives a nod the payment will be processed. Else, the payment will not be made. If the payment is more than Rs 5,000, the customer will be sent an OTP to the registered phone number and he/she has to authenticate the OTP to get the payment processed.

Without a doubt, the new measure would mean the inconvenience to the customer who, so far, did not have to bother about the banality of paying regular bills each month. In order to ensure that customers do not end up missing payment of bills and face penal action from the service providers such as discontinuation of service, RBI has emphasised that every customer should be reminded about making payment sufficiently in advance.

However, the new system is bound to create complications and will never be as smooth as the auto-debit procedure. The new system is designed to address multiple ills – fraudsters and the incidences of some companies charging extra without informing customers.

The people should note that standing payment instructions that are not done through debit and credit cards – school fees are typically an example – will continue to operate without any modification. RBI needs to monitor how the new system works and would need to tweak it if a lot of people face difficulties in crucial payments.