RBI imposed a new rule for the auto-debiting feature

The Reserve Bank of India (RBI) imposed a new rule for the auto-debiting feature of banking transactions, which has been set to take effect on October 1, Friday, to ensure transaction security. According to the new RBI regulation, there would be no more automatic recurring payments for the numerous services associated with it, including as utility bills, phone recharges, DTH, and OTT payments. This is because, as of today, the apex bank's directive specifies that any transaction requiring an extra factor of authentication (AFA) must be approved first. This essentially indicates that no money can or will be debited from the bank account on the basis of an automated debit payment without the customer's agreement. The adoption of AFA, according to the RBI, is intended to offer additional layers of protection to any transactional activity. In this scenario, the central bank's principal goal is to protect bank customers from fraudulent transactions while also improving their ease.

To date, the deadline has been moved forward multiple times. The reason for this is because many big banks, including HDFC Bank, ICICI Banks, and the State Bank of India (SBI), failed to follow the given directive, forcing the RBI to extend the deadline by six months.

“The framework has not been properly implemented even despite the extended timeline,” the RBI stated in a circular. Noncompliance is handled seriously, and it will be dealt with separately. Because some stakeholders have been slow to adopt, there is a risk of widespread customer inconvenience and default. To minimize client inconvenience, the Reserve Bank has decided to extend the deadline for stakeholders to migrate to the framework by six months, until September 30, 2021.”

Besides that, here are five things you should know about this new rule as we move into October.

1) Advance Alerts

According to the new RBI regulation, your particular bank with which you have transactional accounts will have to send you information or an alert 24 hours in advance regarding recurring payment dues. It is sent ahead of time to give the customer time to accept and verify the payment, as the bank will not complete the transaction without the account holder's consent. This extra layer of protection ensures that the customer is aware of every transaction that involves money moving out of their accounts.

2) One-time Registration

While this may appear to be a time-consuming procedure, it is not. Customers will only have to go through the registration process once under the new regulation, and only the first transaction will require the additional element of authentication. Customers can execute further transactions without the AFA after the first transaction. Customers can, in fact, specify the validity period for future transactions upon registering.

3) Payments exceeding more than Rs 5,000 by OTP

If the recurring payment exceeds Rs 5,000, the bank in issue is required by RBI mandate to email the consumer a one-time password (OTP) before the transaction may be executed.

4) Its a Personal Choice

Customers of any bank can opt out of the mandate or any individual transaction at any moment for the sake of convenience. This can be done by using the pre-debit notification, which includes a link to a portal where you can complete the process step-by-step. Keep in mind that this mandate was put in place to protect your bank account and the cash within it.

5) Auto-Debits are not impacted.

These new restrictions and adjustments will not affect any standing instructions that were registered for using existing bank accounts for mutual funds, SIPs, or equivalent monthly installments for loans.

Also Read - Why is SBI share price falling?