New auto-debit payment rules are to be applicable from 1 October

Sept. 30: In a significant move, the additional factor authentication (AFA) rules of the Reserve Bank of India (RBI) will be now implemented from October 1. After the implementation, utility bills, OTT subscriptions and other service payments will not be automatically debited. The AFA rules will be applicable on auto payments linked to debit cards, credit cards, prepaid cards. The new rules are also necessary for all auto-debits below Rs 5,000.

Notably, the RBI rules will be applicable on third-party customer transactions. So, any auto-debit payment that include the use of debit card, credit card, Unified Payments Interface (UPI), and Prepaid payment instruments (PPIs) including wallets will not be allowed if there is no approval from customer concerned. If not approved, now from October 1, auto debit payment of credit, debit cards may fail. New rules will be applicable for the protection of customers, the Bank said.

Auto-Debit Rules:

1. According to the norms laid down by RBI, banks will need to inform customers in advance about recurring payment due. The transaction would be carried only after an approval is received from the customer.
2. So, in simple words, the transaction will no longer be automatic as it would be done following authentication from the customer.
3. In this regard, RBI decided to increase the limit for contactless card transactions and e-mandates for recurring or auto transactions through cards and UPI from Rs 2,000 to Rs 5,000.
4. From October 1 onwards, for recurring payments of more than Rs 5,000, banks are required to send one-time password to customer so that digital payments can be done in a safe and secured manner, according to the RBI guidelines.