Auto-debit transactions may fail from October 1. Here’s the reason

If you are a debit or credit card user with auto-debit facility, then your recurring payments may fail starting October 1, 2021.

A new rule set by the Reserve Bank of India (RBI) makes it mandatory for banks to seek additional factor authentication from customers for auto-debit payments above ₹ 5,000. Now, banks will have to send a notification (via SMS and e-mail) to customers at least 24 hours before a recurring payment is deducted. The transaction will see through only after the customer approves the request.

The RBI says the rule was brought in to make the auto-debit transactions more secure while providing extra flexibility to customers.

The bank message will have the name of the merchant, transaction amount, date of debit, reference number of transaction and the reason for the debit. The cardholder can disapprove the transaction if she wants to.

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Country’s biggest banks, like the HDFC, are ready for the transition while a few others are working overtime to meet the deadline. The Times of India reported that about 75% of card-issuers have the system in place as on September 30.

While the banks are ready, the transaction may still fail if the merchants have not tied up or if the customer has not provided OTP.

Notably, the new rule will have no effect on mutual fund SIP, insurance premiums and other types of recurring payments above ₹ 5,000 if the standing instruction for auto-debit is from your bank account.

The RBI mandate was expected to come into effect from April 1, 2021. The deadline, however, was extended because many banks were not ready with the technical support required. The apex bank then extended the deadline by six months to September 30, 2021.