Auto bill payments and renewal of subscriptions may face hurdles starting from April 1 due to the Reserve Bank of India (RBI)’s new rule mandating banks to seek the customer’s permission before executing each transaction.
Banks have expressed apprehension that they are not ready for implementing the new rule for enabling Additional Factor Authentication (AFA) for recurring payments through debit and credit cards and that many such transactions are expected to get stuck next month, according to a report by The Economic Times.
Over-the-top streaming services like Netflix and Amazon Prime, telecom service providers and power distribution companies will also fall under the new rule’s ambit. Transactions worth Rs 2,000 crore, across sectors such as utility bills, OTT and media subscriptions, are reportedly expected to get affected in April.
Moreover, banks will be required to send a one-time password (OTP) to customers to validate transactions above Rs 5,000.
According to the Internet and Mobile Association of India (IAMAI), millions of customer e-mandates could fail from April 1 as most major banks have not taken requisite steps to comply with the RBI’s requirements for activating registration, tracking, modification and withdrawal of e-mandates.
However, recurring payments using UPI’s AutoPay feature may not get affected.
According to news reports, HDFC Bank, Axis Bank and the State Bank of India (SBI), and financial services firms such as American Express and MasterCard have started notifying their partners about their inability to process “standing instructions or recurring mandate-based payments”.
The Reserve Bank recently rejected the Indian Banks' Association (IBA)’s request for extending the March 31 deadline.
In its August 2019 circular, the central bank had permitted processing of e-mandates on cards for recurring merchant payments from September 1, 2019. This meant that the customer did not have to go through the two-factor authentication process every time a similar transaction was to be carried out with the same merchant.
For this, the card user was required to complete a one-time registration to set the e-mandate. An option would be given to provide e-mandate for either a pre-specified fixed value or a variable value. Any change in the mandate had to be authenticated again.
Read: UPI AutoPay for recurring payments: Step by step guide