To boost the security and safety of card transactions, the Reserve Bank of India (RBI) has mandated new auto-debit rules, effective from the 1st of October 2021. Several e-commerce giants including Paytm. And various banks have cautioned the partners and customers in India to expect an increase in declined transactions as new derivatives have been enforced by the RBI for the way of recurring payment and proceeds in the country.
As per the new norms, the banks will need to inform the customers in advance about the due recurring payments and transactions will be carried out after permission from the customer. So, the deductions will not be automatic but will be done after authentication from the customers.
Also, the customers will have to go through a one-time registration process. Once the registration process is completed they can perform the subsequent transactions without the authentication of any additional factor. Moreover, they can also provide the validity period for future transactions.
As per the new guidelines, the banks are mandated to send a one-time password to the customers for recurring payments above Rs. 5000. Under the new auto-debit rules, the customers can now choose to opt out of a particular transaction via the link provided in the pre-debit notification. However, the important thing to note is that there will be no impact of these rules on any standing instructions using bank accounts for SIPs, mutual funds and loan installments.
In a statement issued by RBI, the new rules of Additional Factor Authentication (AFA) have been framed to make digital payments in India more secure and safe for online customers. The main objective of the framework is to protect customers from online frauds, especially on third-party platforms and enhance customer convenience.