If you use a credit card, debit card or a mobile wallet and have standing instruction on it for auto-debit transactions of more than Rs 5,000, the bank or financial institution is mandated to ask customers to authenticate the transaction from October 1.
The Reserve Bank of India’s deadline for organisations to comply with its guidelines related to recurring online transactions with Additional Factor of Authentication (AFA), which affects those who have auto-debit transactions connected to the credit or debit cards is October 1. As per these rules, banks have to enable AFA, and the customer must be sent a notice at least 24 hours before the actual charge to the card, and it has to be authorised by the customer. This, the RBI said, is to protect customers from fraudulent transactions and enhance customer convenience.
It will inform the cardholder about the name of the merchant, transaction amount, date and time of debit and reference number of transaction/reason for debit. This notification also allows cardholders to opt-out of the transaction. If the standing instruction is through your bank account, the transaction will not be affected.
“While registering e-mandate on the card, the cardholder shall be given facility to choose a mode among available options (SMS, email, etc.) for receiving the pre-transaction notification from the issuer in a clear, unambiguous manner and in an understandable language. The facility for changing this mode of receiving pre-transaction notification, shall also be provided to the cardholder,” the RBI had said.
Banks have started informing customers about possible disruptions as well.
HDFC Bank informed customers that the bank will not approve any standing instruction unless it is RBI compliant. It said that an industry-wide platform is being developed, and it has completed its internal development and integration. “We are now working jointly with merchants to make this platform live for customers at the earliest,” it said. It told customers to make the payment separately on the merchant site and authenticate it with an OTP, or use NetBanking integrated with BillPay to pay bills.
Kotak Mahindra Bank said in a statement that it is “fully geared up” to ensure compliance. “The Bank is closely working with merchant/merchant aggregators to ensure minimal disruption for customers. Kotak is already live on UPI-based mandates and initial user adoption is encouraging. We expect a surge in card and UPI-based mandates as more merchants start offering and more consumers start setting up e-mandates,” it said.
Axis Bank has also reportedly sent such communication to its customers.
Apart from banks, it impacts companies such as Google, YouTube and Facebook, who have reportedly informed customers that there may be disruptions if they have standing instructions. It could also impact OTT players.
The deadline was initially March 31 this year, and the RBI had directed all banks including Regional Rural Banks, NBFCs, and payment gateways to comply. However, some of the players failed to meet the deadline and approached the RBI seeking an extension of the deadline, which was then made September 30, 2021. At the time, RBI had said that any further delay in “ensuring complete adherence to the framework beyond the extended timeline will attract stringent supervisory action.”
Disruption can be expected on Friday, October 1, due to the new rules.