From April 1st, due to the new regulations of the Reserve Bank of India (RBI), automatic payments for mobile, utility and other bills from your account and subscription fees for over-the-top (OTT) platforms may be interrupted. The rule requires additional authentication for regular transactions made with credit cards, debit cards, UPI or other prepayment instruments (PPI), which could affect millions of customers.
What do the rules of the Reserve Bank of India say? What does this mean to you? You need to know 10 important facts about the new rules and how they will affect you.
- Starting April 1, 2021, recurring transactions will require additional identity verification by customers (at least when setting up a new recurring payment).
- Initially, the rule was planned to be used for regular transactions whose value does not exceed Rs. 2,000 However, the Reserve Bank of India announced in December 2020 that the limit has been increased to Rs. 5,000 transactions exceeding this limit will require an additional one-time password (OTP).
- The Reserve Bank of India notified all scheduled commercial banks, card payment networks, issuers of prepaid instruments and the National Payment Corporation of India (NPCI) of major changes in regular transactions in August 2019.
- The ruling applies not only to banks and financial institutions that provide credit cards, debit cards and other prepaid tools, but also to mobile payment wallets and platforms that support UPI-based payments.
- The bank also set a deadline of March 31, 2021 to comply with the Reserve Bank of India circular issued on December 4, “According to arrangements/practices that do not comply with the above regulations, use cards/PPI/UPI to process recurring transactions (Domestic or cross-border)” instructions shall not continue after March 31, 2021. “
- Banks and payment platforms that provide regular transactions must send customers a notice at least 24 hours before the first transaction is debited. The notification method (SMS, email, etc.) will be selected by the user when registering the electronic authorization for recurring payments.
- The notice will essentially require the customer’s consent-the issuer will be able to continue making payments. Subsequent repeated transactions may be carried out without performing this additional step.
- It is expected that the bank will reject these automatic payments, and users will have to make manual transactions to complete bill payments. Banks have also begun to notify customers that they will not be able to process recurring payments, which means that users may have to manually conduct transactions before the institution classifies things and approves authentication.
- In addition to end users, the new regulations may also affect businesses that often use automatic payments as recurring expenses. Due to contractual agreements, third-party payment processors also refuse to share customer information with banks, which may exacerbate the problem.
- The central bank refused to extend the deadline, but expected the matter to be resolved in the next few weeks. Banks and payment platforms have not yet clearly stated whether they are ready to operate under the latest system. At the same time, it is expected that automatic payments through banks and wallets may encounter some trouble-at least initially.
An executive of an e-commerce company said: “E-commerce companies are committed to complying with all applicable regulations. However, the industry is not prepared to implement the e-authorization framework issued by RBI. Most banks and networks need months to upgrade their systems. , In order to comply with regulatory requirements. Starting from April 1, if the Reserve Bank of India does not approve further extensions, the bank will reject customers’ electronically authorized transactions. This will cause significant disruption to regular transactions and erode customers’ trust in digital payments.”
Gadget 360 has contacted banks including HDFC Bank and ICICI Bank as well as platforms such as Google Pay, Paytm and MobiKwik to understand their uses. This story will be updated when the company responds.
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