Auto and recurring payments of your mobile and utility bills as well as subscription charges to any of your favourite over-the-top (OTT) platforms using your credit card, debit card, UPI, or other prepaid payment instruments are likely to get disrupted starting Thursday, April 1 as the Reserve Bank of India (RBI) is applying its recently announced rule for recurring transactions.
What does the RBI rule say? What will it mean for you? Here are 10 important facts you need to know about the new rule and how it will affect you.
- The central bank notified all scheduled commercial banks, card payment networks, prepaid instrument issuers, and the National Payments Corporation of India (NPCI) about the forthcoming regime that it first announced through a circular in August 2019.
- The ruling is set to be applied on not just banks and financial institutions offering credit cards, debit cards, and other prepaid payment instruments, but also on mobile payment wallets and platforms enabling UPI-based payments.
- The RBI said in its initial circular that it had been planning to bring an additional factor of authentication (AFA) on recurring transactions made through credit and debit cards and prepaid payment instruments such as mobile wallets.
- Although the original circular was sent to the banks, card payment networks, and prepaid payment instrument issues, the RBI extended its new rule to platforms enabling unified payments interface (UPI) based payments in January last year.
- Initially, the rule was planned on recurring transactions that are up to Rs. 2,000. The RBI, however, announced in December that on the basis of requests it received from stakeholders, it decided to increase the limit recurring transactions not requiring AFA up to Rs. 5,000. The bank also introduced the March 31 deadline.
- The RBI circular issued on December 4, clearly reads, “Processing of recurring transactions (domestic or cross-border) using cards / PPIs / UPI under arrangements / practices not compliant with the aforesaid instructions shall not be continued beyond March 31, 2021.”
- Once applied, the new rule will require banks and payment platforms offering recurring transactions to send a notification to customers five days before that transaction is planned to be debited.
- That notification will essentially need customers’ consent — upon which the issuer will be able to proceed the payment.
- In addition to end consumers, the new rule is likely to impact enterprises that often use auto-payments for their recurring charges.
- Banks and payments platforms are yet to provide clarity on whether they’re ready to operate under the latest regime. Meanwhile, it is expected that automatic payments through banks and wallets may face some hiccups — at least initially.
Gadgets 360 has reached out to banks including HDFC Bank and ICICI Bank as well as platforms such as Google Pay, Paytm, and MobiKwik to understand their take. This story will be updated as and when the companies respond.
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