A release has been issued by the RBI in which banks and other financial institutions would require additional factor authentication for auto-debiting transactions from October 1. The mandate will be applied to specific recurring payments that exceed Rs. 5,000.
RBI’s mandate was first issued in 2019
The framework for processing e-mandate on recurring online transactions was first released in August 2019 by the RBI. It was limited to cards and wallets, but from January 2020 onwards, the mandate was extended to include Unified Payment Interfaces (UPI’s). RBI has extended the deadline for its implementation by six months, deferring the last date to September 30.
Manual approval for auto-recurring payments above Rs. 5,000
An ‘Additional Factor Authentication’ (AFA) will be required on any debit card, credit card, UPI, and other prepaid payment instruments (PPI’s) if the payment exceeds Rs. 5,000 – to comply with RBI’s mandate which will come into effect from October 1.
Banks need to notify 24 hours in advance the customers
The customers will have to be notified by the financial institutions 24 hours before they auto-debit in advance via SMS or email. The bank will provide information about the cardholder – the merchant name, transaction amount, reference number, reason, and the date and time of the debit.
Who is exempted?
The auto-debited mutual fund SIPs, insurance payments will not be impacted
The changes would be enrolled by default, but the cardholders will also have the option to opt-out of the AFA system. The new mandate will not deduct money from the user’s bank account for mutual fund SIPs, insurance premiums, and other recurring payments automatically. However, users who have set up auto-debit payments for OTT platforms, internet bills, music apps will be impacted by the mandate.
What are the warnings?
RBI will take action if there is further delay in compliance
Since major banks such as HDFC, ICICI, and SBI did not comply with the RBI’s framework, the deadline was pushed several times. The apex bank said that the extension on the part of the banks would attract stringent supervisory action after September 30.