Under the new rule, customers using the automatic recurring payment method to subscribe to a host of services, including bill payments through debit and credit cards, would have to specifically give their nod for each such transaction.
RBI said in a press release that banks and payment gateways had not fully implemented the framework despite a previous timeline extension. “This non-compliance is noted with serious concern and will be dealt with separately,” it said.
The central bank added that this delay could lead to 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,” it said. The central bank added that any further delay in complying with the new rule would attract strict action.
Under the new rule, banks would have to send a notification to customers five days before a particular auto-payment is scheduled and can go ahead with the transaction only after it is approved by the user. Additionally, for payments amounting above Rs 5,000, banks would have to send a one-time password, or OTP, to customers to validate the payment. Payments through other routes, such as the National Payments Corporation of India, which operates retail transactions through apps like Bharat Interface for Money, or BHIM, would not be affected.
The new rule was the result of a circular issued to lenders by the Reserve Bank of India in August 2019. It notified the implementation of an “e-mandate” from customers for auto-pay transactions through credit cards, debit cards and prepaid payment instruments. The rule was introduced for the sake of an Additional Factor of Authentication, or AFA, according to the RBI circular.