RBI Extends Auto Debit Rules By Six Months: What It Means For You

Noting that many stakeholders are yet to migrate to a AFA framework, the RBI has now extended this deadline to Sept 30

The Reserve Bank of India has extended the deadline by six months, for the implementation of new set of rules for recurring online transactions.

The RBI said that it is taking the step to extend this deadline to avoid inconvenience for consumers as it threatened to disrupt existing payment instructions, since various stakeholders in the payments ecosystem were yet to migrate to an Additional Factor of Authentication [AFA] framework.

"To prevent any inconvenience to the customers, Reserve Bank has decided to extend the timeline for the stakeholders to migrate to the framework by six months, i.e., till September 30, 2021", the RBI notification said.

According to a report, big stakeholders in credit cards like HDFC Bank, ICICI Bank and the State Bank of India were yet to migrate, while card operators like Mastercard and American Express began notifying partners of their inability to process automatic recurring payments.

Also Read: Were Axis, HDFC Bank, ICICI Bank PSUs Before Privatisation? A FactCheck

These rules covered cards, wallets and payments made through the United Payment Interface (UPI). Under these rules, banks (or any other financial institution) would need to intimate customers five days in advance, in case of recurring domestic or international transactions. Further, customers would have to approve of transactions worth ₹5,000 or more using a one-time password.

The existing deadline March 31, was set by the RBI based on a request by the Indian Banking Association (IBA). Even after this, several banks and ancillary institutions were calling on the RBI to issue an extension for the same.

Though the RBI did end up extending the deadline to September 30 today, the notification outlining the extension conveyed its displeasure on taking this step.

"It is, however, noted that the framework has not been fully implemented even after the extended timeline (to March 31). This non-compliance is noted with serious concern and will be dealt with separately", the notification states. "Any further delay in ensuring complete adherence to the framework beyond the extended timeline (September 30) will attract stringent supervisory action", the circular states.

What does AFA impact?

AFA impacts all recurring transactions on all cards and wallets.

It was made with the intention of making digital transactions in India safe and secure by making a consumer consent on recurring transactions a must.

Common recurring transactions on this include:

  1. Utility bill payments such as power, water and cooking fuel
  2. Telecommunication bill payments, recharges, DTH payments
  3. Payments for OTT services such as Netflix, Amazon Prime and Disney+ Hotstar
  4. Insurance premiums
  5. Any other credit or debit card based subscription services


However AFA does not affect recurring payments made directly through net banking or having a direct-debit instructions for a bank account. This implies that debits towards loan repayments and credit card bill repayments - popularly charged directly to a bank account - would not be affected. Most major players offer the facility to pay bills, premiums and subscribe to various services, which banks called as a workaround till AFA was properly implemented.

Of course, if available, users could also execute transactions manually on a credit card instead of making it automatic.

The RBI's notification can be read here.

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