New Delhi | Jagran Business Desk: Do you use debit or credit cards or mobile wallets for recurring auto-debit transactions? If yes, then you must be aware that there will be a change in auto-payments rules from next month. According to a notice issued by the Reserve Bank of India (RBI), banks and other financial institutions would need to acquire an additional factor authentication from their customers over recurring transactions including using debit cards, credit cards, Unified Payments Interface (UPI), or other prepaid payment instruments (PPIs).

This new rule will be applied to any recurring payments that exceed Rs 5,000. In April, the RBI had extended these new rules by six months. The extension was done on a request made by several banks, customers, and digital payment companies.

“The framework has not been fully implemented even after the extended timeline. This non-compliance is noted with serious concern and will be dealt with separately. The delay in implementation by some stakeholders has given rise to a situation of possible large-scale customer inconvenience and default. To prevent any inconvenience to the customers, Reserve Bank has decided to extend the timeline for the stakeholders to migrate to the framework by six months, i.e., till September 30, 2021. Any further delay in ensuring complete adherence to the framework beyond the extended timeline will attract stringent supervisory action. A circular advising the above is being issued by the Reserve Bank today,” said the RBI.

What are the changes that will come into effect from October 1?

According to this new rule, every recurring transaction will require additional authentication. Especially payments that exceed the limit of Rs. 5,000, one-time password needs to be validated from the customer's end whenever a payment is due.

This particular rule will apply to all debit, credit cardholders both domestic and international.

How will this new rule impact consumers/users?

This new rule will impact people who have used the auto-debit option for Over the top platforms (OTT) like Netflix, Amazon Prime as well as music apps for Apple Music and Spotify. Further, this will also be applicable on monthly auto-debit utilities such as mobile recharge bills, insurance premiums, etc. Consumers should note that this rule is for recurring payments and is not a one-time-payment authentication situation.

People who use OTT platforms like Netflix platforms have to deal with additional factor authentication (AFA) if the payment due is more than Rs. 5,000.

What does this change mean for banks?

This new rule comes as a major challenge for banks and other payment institutions as it will require them to keep an eye on existing recurring payment flows and to carry on with the standardisation for smooth execution of payments.

Posted By: Mallika Mehzabeen