Auto-debit transactions from cards to change from October 1. Details here

Customers who utilise their debit or credit cards' auto-debit feature for recurring payments may notice some transactions fail starting October 1 because of a new Reserve Bank of India rule.

For auto-debit payments over Rs 5,000, banks and other financial institutions will have to ask customers for second factor authentication. Banks and financial institutions must notify clients at least 24 hours before a recurring payment is collected, according to the new rule.

Only if the customer approves the request will the transaction be permitted.

Before a transaction, banks will send a notification to a customer via SMS and email. The message will include information such as the merchant's name, transaction amount, debit date, transaction reference number, and explanation for the debit.

The cardholder will have the option of approving or disapproving the transaction. The RBI enacted the rule in order to make the auto-debit process more secure and flexible for clients.

A customer should double-check that the debit/credit cards are linked to the right mobile number. The customer may not receive the notice for extra authentication if this is not done.

Many banks, including HDFC, have already begun telling their customers about the change in the auto-debit payment mandate.

If the standing order for auto-debit is from your bank account, the new requirement will have no effect on mutual fund SIPs, insurance premiums, or other types of recurring payments exceeding Rs 5,000.

The rule was intended to take effect on April 1, 2021, but the RBI extended the deadline since many banks had failed to comply. The deadline had been extended by six months, to September 30, 2021, by the RBI at the time. As a result, the new rule will take effect on October 1, 2021.

According to the RBI's circular dated March 31, 2021, banks who fail to follow the rules in the future may suffer severe consequences.