Starting April 1, customer e-mandate transactions for bill payments and subscription renewals are likely to fail due to RBI's new guidelines. Banks have started informing customers about the cancellation of e-mandates for auto-debit of funds from credit, debit cards.
Leading lenders have sent messages to their customers stating that they have to initiate the transaction manually from April 1. For instance, Axis Bank has sent a communication to its customers that said as per regulatory requirements, "processing of e-mandates for recurring transactions without Additional Factor of Authentication (AFA), will be discontinued w.e.f. April 1, 2021."
Similarly, ICICI Bank in a message said that recurring merchant transactions based on Standing Instructions (SI) on ICICI Bank Cards will be disabled effective April 1.
"To continue making payments against your regular utility bills, kindly register your biller through iMobile Pay or Internet Banking. For other standing instruction transactions, you may re-register or initiate transactions at regular intervals," ICICI Bank added.
Most banks are expected to follow the suit before April 1.
Payments that will be impacted
Auto-renewal payments for mobile phone, broadband, DTH, electricity, water, and other utility bills will be cancelled.
The new rule is likely to impact monthly subscriptions to Netflix, Zee5, Amazon Prime, and other OTT platforms. Customers now have to manually renew their subscriptions.
Insurance premium payment will be canceled.
Aut0 payments that will continue
Standing Instructions (SI) registered using bank accounts for house rent will continue,
Similarly, the aut0-debit feature will remain in place for mutual funds and SIP payments.
RBI's new guidelines
In a bid to bolster the safety and security of card transactions, the Reserve Bank of India has made Additional Factor of Authentication (AFA) mandatory after March 31.
The RBI recently rejected the Indian Banks' Association’s request for extending the March 31 deadline.
Under the new norms, banks will be required to inform customers in advance about recurring payment due and the transaction would be carried after receiving approval from customers.
So the transaction would not be automatic but would be done after authentication from the customer. For recurring payments above Rs 5,000, banks are required to send a One-Time Password to customers as per the new guidelines.
The guidelines define payment aggregators as entities that facilitate e-commerce sites and merchants to accept various payment instruments from customers for the completion of their payment obligations without the need for merchants to create a separate payment integration system of their own.Existing non-bank entities offering PA services will have to apply for authorisation on or before June 30, 2021. They shall be allowed to continue their operations till they receive communication from RBI regarding the fate of their application.