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      Auto-Debit Rules From RBI Now Live | Details Inside

      Auto-debit rules that were laid down by the Reserve Bank of India (RBI) in 2019 for recurring online transactions finally came into effect on 1st October 2021 after two years of their initial announcement.

      This update is expects to impact lakhs of customers who have opt for recurring online transactions.

      Starting from online subscriptions of services including Netflix and YouTube to payments of phone and utility bills, all auto-debit transactions will now need to go through a new process.

      The change is also not limits to domestic payments and applies to international recurring transactions as well that are being made through credit and debit cards as well as prepaid payment instruments (PPIs).

      As per sources banks including Axis Bank, Bank of Baroda, Citibank, HDFC Bank, IDFC Bank, Kotak Mahindra Bank, and Standard Chartered are compliant with the new rules.

      SBI Credit Card is also ready to begin with the new process.

      Debit card division of the State Bank of India alongside most other commercial banks are yet to implement the necessary changes at their end.

      The status of a large number of government banks as well as various co-operative banks is also not very clear to industry stakeplayers.

      Vishwas Patel, Chairman of Payments Council of India (PCI) and Executive Director of Infibeam Avenues Said :

      “Indian banks are like a rocket, this does not mean that they aim for the sky, but they really only work when there is a fire in the backside to complete the timeline to do that. So, if today is the deadline, now we will start looking at the end moment and working overtime to get things done,”.

      Implementing of the new transaction process is mainly on banks, payment gateways and merchants remain ineffective in providing a seamless experience from their side.

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      Many commercial banks have inform their customers that they will decline all non-compliant transactions set at the merchant site or app to follow the new norms.

      Irrespective of the bank, customers using Mastercard are also likely to be impact at the present stage due to an ongoing ban of the card issuer in the country. 

      Apple separately warned developers building apps for its devices about the decline in some transactions due to the update.

      But after some expected disruption at the beginning the update is believe to help improve recurring transactions experience for users over time.

      RBI is also claiming it as one of the security measures to restrict frauds as consumers will have the ability to stop any recurring transactions from their end and stay inform about debit transactions.

      But there are chances that many people would not be able to receive the benefits of the new rules as these require re-registration with merchants.

      Banks are informing their customers about the update.

      Also merchants including YouTube have notified users about the change and ask them to update their payment details.

      But some users are likely to take time to understand what exactly they need to do.

      The update is notably in effect for both existing and new subscriptions.

      It means that no matter whether you subscribe to a streaming service or enroll for a regular bill payment in the past, you need to re-register under the new rules.

      You are not require to do any updates if the payments are relate to a bank loan or mutual funds as they are process natively from your bank.

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      Auto-debit or recurring transactions via Unified Payments Interface (UPI) are also not impact as UPI umbrella body NPCI implement a system as per the new rules earlier this year.

      How to Register for Recurring Transactions under New RBI Rules?

      Auto-debit rules bring a new transaction process in which users need to re-register their card with merchants like Netflix and YouTube for recurring transactions.

      Auto-debit also requires two-factor authentication for completing the registration.

      When the registration for a recurring transaction is complete then you will receive an SMS from your bank.

      You will also be notified through a message when a recurring transaction is due.

      You will receive an SMS message from your bank 24 hours before transection process for transactions above Rs. 5,000.

      It will ask you to give consent through a link provided in the text.

      The transaction will fail if you not able to do so.

      You will not be require to approve a recurring transaction that is up to Rs. 5,000 but you will still get an SMS with a way to cancel the transaction.

      In both cases transactions of up to Rs. 5,000 and above your bank will send you a link to a standalone webpage through an SMS message to let you cancel or pause them.

      You will get an OTP that you need to enter on the webpage to disable the recurring transaction.

      It will also show upcoming recurring transactions that you can cancel.

      For customers who don’t want to go with the new process or have an account in a bank that is yet to implement the changes then RBI has retain the existing system where you need to make payments manually on a regular basis by going to the merchant’s site or app.

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      Problems for Banks and Merchants

      RBI has construct a framework for banks and merchants that needs to be deploy for recurring online transactions.

      But the technology for that framework has not yet been natively create neither by banks nor merchants.

      RBI instead need to go for a third-party solution that is traditionally call a subscription management platform.

      Companies which includes BillDesk, PayU, and Razorpay have develop their own subscription management platforms that are being deploy by leading banks and merchants to comply with the auto-debit guidelines.

      PayU upgraded its existing Zion platform for issuing banks as a standalone solution for recurring transactions.

      PayU was originally launch a few years back as a merchant-centric solution to help merchants with registration and payment processes.

      Razorpay brought Mandate HQ in July for processing e-mandates on recurring online transactions.

      BillDesk has a monopoly in recurring transactions space with its SI Hub.

      BillDesk was embrace by some early banks and merchants before the arrival of solutions from PayU and Razorpay.

      Deploying a subscription management platform over the existing core banking system is what banks are doing at this moment.

      But these platforms are just an API-based solution in which the process is not that easy as banks need to integrate the platforms and test them end-to-end with different merchants.

      Merchants need to deploy these platforms to pass details such as the billing cycle and amount that users are paying.

      Subscription management platforms involve certain costs that banks and merchants need to pay.

      These costs could have been transfer to customers just like in case of debit cards and cheque books but RBI clearly directed banks to not levy or recover any charges for providing the new e-mandate facility.

      THANK YOU FOR READING.

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