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FAQs: RBI's new auto-debit rules kick in from today; answers to all your queries on impact and resolution

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The new auto-debit rules come into effect today as mandated by the Reserve Bank of India (RBI). As a result, the automatic recurring payment for various services including recharge and utility bills will remain impacted and an additional factor of authentication (AFA) will become mandatory.

FAQs: RBI's new auto-debit rules kick in from today; answers to all your queries on impact and resolution
The new auto-debit rules come into effect today as mandated by the Reserve Bank of India (RBI). As a result, the automatic recurring payment for various services including recharge and utility bills will remain impacted and an additional factor of authentication (AFA) will become mandatory.
In view of this, let's understand what the new rules are about and who will be impacted:
What is the new rule exact about?
Any recurring transactions debited automatically from debit, credit, or prepaid cards will require explicit approval before the transaction goes through from today. Under the new norms, banks are required to inform customers in advance about recurring payments due and transactions would be carried following a nod from the customer.
So, the transaction would not be automatic but would be done after authentication from the customer.
Most of the banks including the State Bank of India (SBI) have informed their customers about the new rules. HDFC Bank in a bulk message to customers said as per RBI guidelines on e-mandate on cards, the bank will decline non-compliant recurring transactions at merchant web or app on credit/debit card from October 1, 2021.
So, what kind of services will be impacted and what will not?
This new rule will impact users who have given auto-debit mandates for recurring payments from their debit/credit cards and/or mobile wallets for payments such as a subscription to OTT platforms such as Netflix, Amazon Prime, music apps, payment of mobile bills, utility bills etc.
But don't worry about the EMI payments yet. Any standing instructions registered using bank accounts for mutual funds, SIPs, equated monthly installments for loans, insurance premiums, etc will not be impacted by these new rules.
Why RBI has announced this new rule?
As part of risk mitigation measures, RBI announced this step to bolster the safety and security of card transactions. RBI had said the requirement of AFA will make digital payments in India safe and secure and the primary objective of the framework is to protect customers from fraudulent transactions and enhance customer convenience.
So, what should customers do?
Now, users have two options: the first is to manually make a one-time payment every month on the merchant site via a saved debit or credit card, while the other option is to use the net banking portal to set up auto-pay for utilities and other services that require recurring payments directly from the savings or current account instead of the card.
It’s important to note that this is only for recurring payments of less than Rs 5,000. For payments above that amount, customers may have to recreate the mandate and authenticate the transaction again. So, it would be best to wait for operational details from banks in this case.
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