RBI Mandates Auto-Debit Verification From Oct 1: All You Need To Know

Get ready for an additional layer of verification for all recurring payments exceeding ₹5,000 through popular payment instruments, since the Reserve Bank of India's directive on Additional Factor Of Authentication [AFA] will become applicable from October 1.

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.

Banks have already started getting in touch with their customers about this change. Most of these notifications draw the attention of their customers towards the fact that auto-debit instructions and recurring payments exceeding ₹5,000 on existing credit and debit cards would need to be authenticated via a one-time password through a pre-debit notification. However, transactions below ₹5,000 would be honoured.

Any auto-debit or recurring transactions that are not compliant with this regulation would not be honoured, and banks are informing their customers that such transactions would have to be directly cleared.

Though banks have notified their customers regarding cards, these rules apply to a variety of payment instruments including cards, wallets and payments made through the United Payment Interface (UPI).

On March 31, 2021, the RBI had granted banks a six-month extension to implement AFA into their payment systems.

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

What does AFA impact?

AFA impacts recurring transactions on all cards and wallets.

It was made with the intention of making digital transactions in India safe and secure by making 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.

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