Your auto-debit payments won’t fail: RBI extends deadline for extra authentication

The Reserve Bank of India (RBI) has extended the deadline for banks to comply with norms issued earlier for additional factor authentication for recurring online payments for which e-mandates are normally given such as auto-debits of payments for utility bills, OTT platforms etc.. The central bank has extended the current deadline of March 31, 2021, to September 30, 2021.

This is good news for many who have given their banks auto-debit mandates. Good news because many banks and payment gateways were yet to comply with RBI’s mandate and had asked the apex bank for additional time to comply with the same. If the deadline hadn’t been extended then, come April 1, automatic recurring payments for various services including recharge and utility bills would have failed.

As per the RBI guidelines which were to come into force after March 31, 2021, banks are required to send a notification to customers five days before the payments are slated to be deducted and allow the debit only after the customer has confirmed it. The new rule announced was about to kick-in from April 1, 2021.

As per the RBI circular issued today, “The requirement of Additional Factor of Authentication (AFA) has made digital payments in India safe and secure. In the interest of customer convenience and safety in use of recurring online payments, the framework mandated use of AFA during registration and first transaction (with relaxation for subsequent transactions up to a limit of Rs 2,000, since enhanced to Rs 5,000), as well as pre-transaction notification, facility to withdraw the mandate, etc. The primary objective of the framework was to protect customers from fraudulent transactions and enhance customer convenience. Based on a request from Indian Banks’ Association (IBA) for an extension of time till March 31, 2021, to enable the banks to complete the migration, Reserve Bank had advised the stakeholders in December 2020 to migrate to the framework by March 31, 2021. Thus, adequate time was given to the stakeholders to comply with the framework. It is, however, noted that 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.”

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As reported in the
Economic Times, many big banks such as HDFC Bank, ICICI Bank, Axis Bank, State Bank of India and leading card scheme operators such as MasterCard had notified their partners about their inability to process standing instructions or recurring based payments. This would have lead to the huge disruptions in the auto-debit payments for many customers.

The new rule was first issued by the central bank in August 2019, however, banks have not developed capabilities to support the new system.

Effective from January 1, 2021, RBI had enhanced the limit for contactless card transactions and e-mandates for recurring transactions through cards (and UPI) from Rs 2,000 to Rs 5,000 from with a view to further the adoption of digital payments in a safe and secure manner.



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