The regular automatic payments using debit and credit cards or prepaid Payment Instruments (PPIs) or Unified Payments Interface (UPI) will be impacted from tomorrow i.e. April 1, 2021. This development follows the Reserve Bank of India’s direction to all banks including RRBs, NBFCs, and payment gateways that the processing of recurring transactions (domestic or cross-border) under arrangements/practices not compliant with additional factor authentication (AFA) would not be continued beyond March 31, 2021.
This rule is likely to impact the monthly subscription charges for different streaming platforms including Netflix, Amazon Prime, Disney+ Hotstar as well as mobile and utility bills.
Here's what customers will have to do from April 1 onwards
According to the central bank’s new ruling, customers using automatic recurring payments will now be required to undertake a one-time registration process, with AFA validation.
Is there an exception to this?
Yes. This new rule is only applicable for recurring amounts above Rs 5,000.
An additional one-time password (OTP) will be needed for transactions done above Rs 5,000 only. However, most banks have cancelled all standing instructions payments, even below Rs 5000.
Earlier, the RBI had allowed transactions up to Rs 2,000 to be exempted from e-mandate based recurring transactions without AFA. However, in a notification on December 4, 2020, this limit was extended to Rs 5,000.
The cardholder will also have an option to "opt-out" of a particular transaction, according to RBI.
What banks are supposed to do?
Under the new norms, banks will be required to inform customers in advance about recurring payment due and transactions would be carried following a nod from the customer.
The mode of notification will be chosen by the consumer at the time of registering the e-mandate for recurring payments.
Why the new rule has been announced?
As part of the risk mitigation measure, RBI announced this step to bolster the safety and security of card transactions.
