According to a statement by the Reserve Bank of India (RBI) in March 2021, it had extended the deadline for the processing of recurring online transactions. The extension is effective up to the notice period of six months, meaning the new rule will be in effect from the month of October onwards.
According to the Reserve Bank of India, this new rule was introduced to make the recurring transactions more secure and reliable for the users. RBI’s efforts to make online transactions more secure are undoubtedly excellent as it aims to use Additional Factor of Authentication (AFA).
Like this, the level of security of other transaction methods like debit and credit cards, Unified Payments Interface (UPI), and other prepaid payment instruments (PPIs) will reach the next level. It is usually seen that recurring transactions take place for mobile subscription plans and streaming platforms.
Mostly, these auto-generated transactions occur for Netflix, Amazon Prime, Disney+Hotstar, and others OTT platforms. The RBI said, “The Introduction of Additional Factor of Authentication (AFA) has proved to be effective for digital payments in India.”
“In the interest of customer convenience and safety in the use of recurring online payments, the framework mandated use of AFA during registration and first transaction (with relaxation for subsequent transactions up to a limit of ₹2,000, since enhanced to ₹5,000), as well as pre-transaction notification, facility to withdraw the mandate, etc.”
“This framework was prioritized to protect customers or OTT platform users from fraudulent transactions and make the platform of online transactions more reliable,” said the RBI.
Now it is the duty of the banks to inform their customers in advance about the recurring payments prior to 24 hours of the debit. Customers can expect the notification via SMS or email or both, depending on the bank.
RBI has also set a limit of up to Rs. 5,000 for auto-debiting to make the process of online transactions more reliable and secure. Still, if someone wishes to cross the Rs. 5,000 limits then they have to use a one-time password (OTP) to successfully verify it.
If someone wishes to stop their recurring payments, then they are allowed to opt-out at any moment with zero charges. It will be the duty of the bank to provide its customers an online facility to withdraw from any e-mandate at any point in time.
In December 2020, the Reserve Bank of India had advised stakeholders to migrate their framework by March 31, 2021, as banks were given time to complete their migration. Still, after much delay, the RBI again extended the deadline because the framework failed to get fully implemented ever after the extended timeline.
The delay by the stakeholders gave rise to inconvenience to the customers, that is why the RBI has given more six-month period to the stakeholders to migrate their framework successfully. If the stakeholders fail to migrate even in the extended period, then necessary strong supervisory actions will be taken by the RBI.