To ensure the security of transactions, the Reserve Bank of India (RBI) mandated a new rule for the auto-debiting facility of banking transactions that were set to take effect from October 1, Friday. The new RBI mandate indicated that there was to be no more automatics recurring payments for the various services that are associated with it, such as utility bills, recharge of phone, DTH and OTT payments. This is because starting from today, the apex bank’s directive stated that there needs to be an additional factor of authentication (AFA) before any transaction can be given the go-ahead.
This essentially means that without the customer’s seal of approval, no money can or will be deducted from the bank account on the basis of an automated debit payment. The RBI said that the reason for the introduction of AFA is to bring forth added layers of security to any transactional process. The apex bank’s primary objective, in this case, is to protect bank customers from fraudulent transactions while simultaneously also enhancing customers’ convenience.
The deadline has been moved up several times to date. The reason behind it is that many of the major banks such as HDFC Bank, ICICI Banks and the State Bank of India (SBI) had not complied with the issued mandate, which forced the RBI to extend the deadline by six months.
Speaking on the same, the RBI said in a circular, “The framework has not been fully implemented even after the extended timeline. This non-compliance is noted with serious concern and will be dealt with separately. 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.”
Having said that, here are five things that you should know about this new rule going forward into the calendar month of October.
1) Advance Alerts
As per the new norms of the RBI mandate, your respective bank with which you have your transactional accounts will have to send you information or an alert regarding the recurring payment dues, 24 hours in advance. It is sent in advance so as to give the customer time to acknowledge and verify the payment, because, without that approval from the account holder, the bank will not finalise the transaction. This added layer of security ensures that the customer is involved in each and every transaction that sees money move out of their accounts.
2) One-Time Registration
Now, while it may sound like a tedious process, it actually is not. Customers need only go through the process of registration once under this new mandate and it is only the initial transaction that needs the additional factor of authentication. After the first time, customers can perform other future transactions without the AFA. In fact, while registering, customers can provide the validity period for future transactions.
3) OTP Payments Exceeding Rs 5,000
If the recurring payment is above the limit of Rs 5,000, then according to the RBI mandate, the bank in question is required to send the customer a one-time password (OTP), before the transaction is processed.
4) It Is Optional
For the sake of convenience, customers of any bank can choose to opt-out of the mandate or any particular transaction at any point in time. This can be done through the use of the pre-debit notification which has a link that will take you to a portal where it can be done step-by-step. Keep in mind that at the end of the day this mandate was introduced to secure your bank account and the funds therein.
5) No Impacts on Auto-Debits
Any standing instructions that were registered for using existing bank accounts for mutual funds, SIPs or equated monthly instalments for loans would not be impacted by these new rules and changes.
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