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Online automatic transactions will not fail from April 1, RBI extends deadline by 6 months

By Priyanka Verma 
Updated Date

The Reserve Bank of India has now extended the timeline for implementation of new guidelines for automatic payment system by six months. In a circular on Wednesday, RBI noted that it has decided to extend the timeline for stakeholders by six month to prevent inconvenience to customers. RBI had previously granted the Indian Banks’ Association an extension to complete the migration by March 31, 2021 for the new policy that was introduced in December 2020. It however noted that the new framework had not been implemented by banks despite the extended timeline. Previous reports had noted that the RBI had refused to grant an extension to banks following which banks started notifying customers about failure in automatic recurring payments from April 1.

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Banks notified customers to switch to alternate payment methods as all recurring automatic payment methods that were linked to a customers’ credit or debit cards, The new guidelines have made Additional Factor Authentication (AFA) for banks mandatory. The new norms require banks to inform customers in advance about recurring payment methods. This means the money will only be debited from a customer’s account only after his or her consent. For transactions above Rs 5000, banks will also be required to send one time passwords to customers

HDFC Bank, ICICI Bank, SBI as well as card scheme operators like American Express and Mastercard notified network partners about their inability to process standard instructions recurring mandate-based payments, as per reports. Vendors also suggested alternate payment methods to users.

“Dear customer, as per regulatory guidelines, recurring merchant transactions based on Standing Instructions (SI) on your ICICI Bank Cards will be disabled effective 1-Apr-21. To continue making payments against your utility bills, kindly register your biller through eMobile Pay or Internet banking,” ICICI customers received a message on Wednesday morning. The message also directed customers to re-register or initiate transactions at regular intervals for other standing instruction transactions.

Recently, RBI enhanced the limit for contactless card transactions and e-mandates for recurring transactions through cards (and UPI) from Rs 2,000 to Rs 5,000 from January 1, 2021, to further adopt digital payments safely and securely and to curb data leaks as well.

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“All the ecosystem players, be it banks and payment gateways are guilty of not taking RBI directive seriously from 2019 and not being able to come on a single platform, which we should have done at least a couple of months back so that there could have been a smooth transition to the new way of doing recurring transactions,” Payments Council Of India chairman Vishwas Patel told news agency PTI. “Everybody has understood the seriousness of it because it is Rs 2,000 crore a month business, as per PCI estimates. We hope that the cycle is not broken and the end consumers and merchants are not inconvenienced,” he added.

The RBI has issued two circulars to banks — ‘non-bank prepaid payment instrument issuers’, and ‘authorized card payment networks for processing of e-mandates. The deadline to comply with these mandates is March 31, 2021.The circulars were issued in 2019 and the RBI has refused to give an extension to banks as per reports. Earlier this month, the RBI directed payment gateways, card-issuing banks, and other payment service providers to stop storing card details permanently citing data leaks. The payment gateways would be allowed to store data in an encrypted format.

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