RBI's new auto debit rules will come into force on October 1. As per the guidelines, banks will be required to add an additional authentication step for all recurring payments done through debit cards, credit cards and UPIs.
The change in rules will largely affect auto payment of utility bills, insurance premiums and subscriptions to online services.
AMC officials and MFDs said SIP transactions will not be impacted as the new directive will only affect auto-debit mandates through debit cards, credit cards and UPI.
Most SIP transactions happen through NACH mandate, which is executed directly by the bank.
What the new rules say?
- RBI has asked banks to send a pre-debit notification to their credit and debit card users 24 hours before the auto debit is scheduled.
- The notification should provide an option to the customer to opt-out of the payment.
- For payments above Rs 5,000, banks will have to authenticate the transaction through an OTP.
Which transactions will be affected?
Customers use credit and debit cards mostly for recurring payments to OTT platforms, news websites and utility companies, among other online services. These transactions are likely to be impacted.
However, a few online distributors offer UPI based e-mandate. Investors who have opted for this will have to give one more authentication to continue their SIPs.
What should customers do?
Banks have started informing customers about their inability to execute auto debit payments from October 1. If you or your client have any recurring payment linked to the cards, there's a need to first check if the bank has established the process to comply with new regulations.
Payments below Rs.5,000 should continue as usual after fresh registration. For transactions above that, your clients will have to give consent before every deduction through OTP.
For banks, which are yet to comply with the new regulation, customers have no choice but to register auto debit transactions through net banking.
