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ToggleThe Reserve Bank of India (RBI) issued a circular updating the rules for recurring payments using debit and credit cards. These changes became applicable from 1st October 2021 wherein cardholders are given the option to either approve or disapprove the transaction before it is auto debited.
Most banks had intimidated their customers about the proposed changes to the rules governing auto-debit transactions. However, some cardholders still faced the hassle of failed payments during the previous month as they migrated to the new rules.
Before discussing the changes applicable to auto-debit transactions, let us understand what a recurring payment is.
It is a payment mechanism wherein you authorize the merchants to automatically debit a predetermined amount from your account at a periodic interval, such as monthly to avail of ongoing access to goods and services.
Once you have approved these payments, the amount is charged against your card or debited from your account until the end of the subscription period or you cancel the permission.
The rules related to the recurring transactions were to take effect from March 2021; however, as several participants were not prepared, the time was extended, and the rules became effective from 1st October 2021.
Additionally, you may register utility bills (like gas, electricity, and water), landline telephone, insurance billers, postpaid mobile bills, and broadband and direct-to-home (DTH) services via your Internet banking account.
The new guidelines have primarily been implemented to protect you against online frauds especially on third-party platforms where the possibility of such payment-related scams is higher.
Introducing this new e-mandate aims to offer you more control when making recurring transactions with your credit or debit cards.
The following automated transactions via debit or credit cards may be affected by the new guidelines.
All in all, the new rules will benefit customers as it prevents online fraud. More than 900 million cardholders may be included as the new rules empower them to stop the payments, thus building their confidence. Moreover, it can make education and entertainment affordable as customers can opt for monthly payments instead of annual payments.
It is a set of standing instructions for recurring merchant transactions via credit or debit cards. With these instructions, you consent the merchants to debit your card for the payments.
The mandate can be fixed where the amount is the same (OTT subscription) or variable for every transaction (utility bill).
Additional Factor of Authentication (AFA) is required for the following:
The bank will send an OTP to your registered mobile number to enable you to complete the AFA procedure.
The information may vary from one merchant to another but some common details, such as mandate start and end dates, limit amount, and payment information (consumer number, policy number, and relationship number) are needed.
The mandate limit amount and the end date can be modified.
All transactions that are not compliant with the new rules will be declined. The transaction may also be declined if the merchant is unable to provide details as required by the RBI.