RBI extends deadline for processing auto-debit payments by 6 months

To make digital payments in India 'safe and secure', RBI had earlier made Additional Factor of Authentication mandatory after March 31

In a huge relief for banks, Reserve Bank of India on Wednesday extended the timeline for processing recurring online transactions by 6 months to September 30, 2021.

Come April there were supposed to be no automatic recurring payment for various services, including recharge and utility bill, as RBI has made Additional Factor of Authentication (AFA) mandatory after March 

However, banks and payment gateways had sought 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 (domestic or cross-border) 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 risk mitigation measure, RBI announced this step to bolster safety and security of card transactions.

Non-readiness of some of the players could have impacted recurring payment such as of 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.

"In August 2019, the Reserve Bank of India (RBI) had issued a framework for processing of e-mandates on recurring online transactions. Initially applicable to cards and wallets, the framework was extended in January 2020 to cover Unified

Payments Interface (UPI) transactions as well. The requirement of Additional Factor of Authentication (AFA) has made digital payments in India safe and secure. In the interest of customer convenience and safety in use of recurring online payments, the framework mandated use of AFA... The primary objective of the framework was to protect customers from fraudulent transactions and enhance customer convenience. Based on a request from Indian Banks’ Association (IBA) for an extension of time till March 31, 2021, to enable the banks to complete the migration, Reserve Bank had advised the stakeholders in December 2020 to migrate to the framework by March 31, 2021. Thus, adequate time was given to the stakeholders to comply with the framework," said RBI in its circular on Wednesday. 

"It is, however, noted that the framework has not been fully implemented even after the extended timeline. This non-compliance is noted with serious concern and will be dealt with separately. The delay in implementation by some stakeholders has given rise to a situation of possible large-scale customer inconvenience and default. To prevent any inconvenience to the customers, Reserve Bank has decided to extend the timeline for the stakeholders to migrate to the framework by six months, i.e., till September 30, 2021. Any further delay in ensuring complete adherence to the framework beyond the extended timeline will attract stringent supervisory action," the central bank further said. 

Under the new norms, banks will be required to inform customers in advance about recurring payment due and transaction would be carried 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 one-time password to customer as per the new guidelines.

"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 (PCI) Chairman Vishwas Patel told PTI on Tuesday.

"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.

(With PTI inputs)