Your auto-debit payments won’t be declined from April 1 as RBI extends deadline

The new rules required banks to enable Additional Factor Authentication (AFA) and send a notification to customers prior to their payment being deducted.
Online payment through card
Online payment through card
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In a relief for customers and businesses that have auto-debit payments set up, the Reserve Bank of India (RBI) has extended the deadline on its new rules for recurring transactions, by another six months, to October 2021. 

The new rules, which were set to come into force from April 1, required banks to enable Additional Factor Authentication (AFA) and send a notification to customers prior to their payment being deducted, with a choice to opt-out of the payment as well. 

The Economic Times had earlier reported that major banks like State Bank of India (SBI), HDFC Bank and ICICI Bank as well as card companies such as Mastercard and American Express were ready to decline all recurring payments from April since they were not in compliance with the new rule. 

In August 2019, the RBI had issued an order mandating the 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. 

This was put in place with the primary objective of protecting consumers from fraudulent transactions and enhancing customer convenience. 

Based on a request from the Indian Banks’ Association (IBA) for an extension of time to enable the banks to complete the migration, the RBI had advised banks in December 2020 to migrate to the new system by March 31, 2021.

However, the RBI noted that the framework has not been fully implemented even after the extended timeline. “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,” the RBI said in a statement. 

The RBI added that any further delay in ensuring complete adherence to the framework beyond the extended timeline will attract stringent supervisory action.

In another circular issued on Wednesday, the RBI also extended the deadline on new card storage norms for licensed aggregators and merchants by a further six months. This rule will now come into effect from January 2022. 

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