New Rule on Auto-Debit from Cards to Take Effect from October 1st

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Customers who use the auto-debit feature of their debit or credit cards for recurring payments may notice some transactions fail from October 1 onwards.

According to a recent mandate by the Reserve Bank of India (RBI), the facility for the auto-debit from credit/debit cards will change from next month onwards.

The new rule will require banks to notify the customers 24 hours, in advance, about an upcoming auto-debit recurring transaction for credit/debit cards. The notification will include the following information:

  • Name of the merchant
  • Amount to be debited
  • The date on which the amount will be debited
  • Transaction reference number
  • Purpose of the debit

Customers will have to provide additional factor authentication for approving such auto-debit requests in advance. Only after customers approve the pre-debit notifications will the transactions be processed.

To put it simply, from now on, customers will have to provide additional factor authentication (also known as OTP validation) for mandate registration as well as the first debit transaction. Once that is done, the subsequent transactions will happen automatically, without any manual intervention.

Customers have to ensure that their debit/credit cards are linked to the correct mobile number. Otherwise, they may not receive the notification for extra authentication.

Additionally, customers will have to manually authenticate auto-debit transactions above Rs 5,000/- with a one-time password (OTP). They can approve such transactions using the link they will receive in the pre-debit notification from the issuer bank.

Also Read: Success Rate of eNach Mandates/UPI Autopay Helps Both NBFCs & Customers

The auto-debit rules concern only the standing instructions on cards. Therefore, EMIs and SIPs payments are unlikely to face turbulence. The rules are likely to impact customers who make card auto-transactions for bill payments, OTT subscriptions, and other online services via debit or credit cards.

Not all banks may succeed in meeting the central bank’s deadline. Therefore, customers of banks that are not compliant with the guidelines yet may have to make manual payments after October 1 as auto-payments will stop working.

As a result, online merchants and customers could face disruptions due to the new auto-debit rules on debit and credit cards.

Being one of the biggest payment aggregators in the country, Paytm is also working with major private banks to update our system to ensure compliance with the new RBI mandate.

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