New credit, debit card rule for recurring payments starts on October 1

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The Reserve Bank of India (RBI) has mandated the use of some new security features with respect to the auto-debit facility in one’s bank account starting October 1, 2021. According to the new rules, those who use auto-debit facility to pay recurring bills from their bank accounts may have to process some of the auto-debit transactions manually hereafter. While several banks like Axis and HDFC alerted their customers well in advance about the probability of upcoming auto-debit transactions failing, certain payment service providers are yet to comply with the latest RBI rules.

“To safeguard consumers, the Reserve Bank of India (RBI) has put in place new safety and security measures for card payments. Please note: Effective 1st Oct 2021, the Bank will not approve any Standing Instruction (e-Mandate for processing of recurring payments) given at Merchant Website / App, on HDFC Bank Credit card/Debit Card, unless it is as per RBI compliant process,” HDFC Bank quoted on its website.

“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 honoured. You can pay the merchant directly using your card for uninterrupted service,” Axis Bank said.

What is E-mandate?

RBI’s new framework for processing ‘E-mandates’, the digital payment infrastructure introduced by RBI and National Payment Corporation of India (NCPI) in 2018, for recurring online transactions were initially due to become effective from March, 2021. The date was pushed till October 1, 2021, as several stakeholders demanded more time to comply.

E-mandates are basically a set of standing instructions that allow banks and corporates to collect payments from customers virtually and without human intervention. This enables banks to process requests for auto-debit for your EMIs, mutual fund SIPs, digital subscriptions, etc.

What’s new?

As per the new rules, for all auto-debit transactions above Rs 5,000 done via debit cards, credit cards, UPI, and other Prepaid Payment Instruments (PPIs), the central bank has introduced an Additional Factor of Authentication (AFA). Such transactions will need to be authenticated by the customer manually via a one-time password (OTP). All stakeholders are, thus, required to ensure full compliance with the framework by September 30, 2021.

Banks will send a pre-debit message or email to customers at least 24 hours prior to the payment. This will act as an ‘alert message’ for the customer to review the upcoming expense and cancel if they like. The pre-transaction notification will inform cardholder about the name of the merchant, transaction amount, date, time of debit, reference number of transaction, e-mandate, the reason for debit, i.e., E-mandate registered by the cardholder.

Watch out

Customers must ensure that correct mobile number is registered with the debit/credit cards that will be used to receive a notification for approval. In case the registered number is inactive or unavailable, you may miss the notification and auto-debit will be interrupted. Notabley, this framework will be duly applicable to all recurring payments.