No Automatic Recurring Payment From April 1, Directs RBI

From April 1 there will be no automatic recurring payment for various services including recharge and utility bills as RBI has made Additional Factor of Authentication (AFA) mandatory. However, banks and payment gateways are seeking additional time to comply with the RBI directive on automatic recurring payment. On December 4, RBI had directed all banks including RRBs, NBFCs, and payment gateways that the processing of recurring transactions using cards or Prepaid Payment Instruments (PPIs) or Unified Payments Interface (UPI) under arrangements/practices not compliant with AFA would not be continued beyond March 31, 2021.

As part of the risk mitigation measure, RBI announced this step to bolster the safety and security of card transactions. Non-readiness of some of the players could impact recurring payments such as utility bills, recharge of phone, DTH, and OTT, among others, post-March 31. 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, with a view to further the adoption of digital payments in a safe and secure manner.

Under the new norms, banks will be required to inform customers in advance about recurring payment due and transactions would be carried the following nod from the customer. So the transaction would not be automatic but would be done after authentication from the customer. For recurring payments above Rs 5,000, banks are required to send a one-time password to customers as per the new guidelines.

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