How to avoid direct debit failures from October 1


According to new guidelines from the Reserve Bank of India (RBI), customers are required to carry Additional Factor Authentication (AFA) on all recurring payments made through their debit cards, credit cards, UPIs and prepaid payment instruments. (PPI). This rule will come into effect from October 1.

“RBI has called on all banks to comply with the guidelines and has asked issuing banks to inform their customers of the changed rules and what to do,” said Shashank Kumar, co-founder of Razorpay.

As the deadline approached, banks began to intimidate customers. “Dear Customer, from October 1, 2021, direct debit payments for recurring transactions that do not comply with new regulatory guidelines will not be honored on your ICICI Bank credit or debit card, and payments will have to be made directly on the merchant site. / app, “ICICI Bank wrote in a message to customers’ phones.

This is what you need to do to avoid defaulting on recurring transactions.

Additional Factor Authentication: Some large private banks and large merchants have already built in the technological infrastructure necessary to comply with the new RBI guidelines.

If your bank has communicated this to you, you should visit their website on October 1, check the list of merchants the bank has enabled for AFA, and re-register with each merchant whose service you use to enable them. to continue to charge your card for Payments.

When registering, you must also enter the period of validity and the maximum amount of the standing instruction. Any payment request beyond the maximum amount will require one-time password (OTP) based authentication at the time of transaction.

AFA is a one-stop process for the transactions below ??5,000. “AFA is the same as approval using OTP at check-in. If the amount involved is less than ??5,000, a single sign-on is enough, ”said Ashish Goyal, Fintech Association of Customer Empowerment (FACE) member and co-founder and CFO of EarlySalary.

For subsequent transactions within this threshold, your bank will send you a debit notification with the amount and the merchant’s name 24 hours before each payment. The notification will also contain a link that will take you to a page that will allow you to view, modify or cancel the payment or money order. If you do not take any action on the notification, the transaction will be completed.

For the above payments ??5,000, you will need to approve each transaction with an OTP sent by the bank.

Banks will send all correspondence to your registered phone number and email id. Therefore, you need to make sure that your correct information is linked to your cards.

If the bank is not compliant: Customers who still have not received an update from their bank regarding the change should make direct payments to service providers through merchant apps, websites or the banking system net from their bank to avoid default.

Moreover, it is not enough that your banks are ready to comply with the new regulations.

“Every merchant has an acquiring bank that accepts payments on their behalf. If this acquiring bank has not complied with the rules, your transactions will still not be completed even if your issuing bank is ready for the transition, ”said Mihir Gandhi, Partner, Head of Payment Transformation, PwC India.

Some banks have suggested alternatives. HDFC has informed its customers that they can also pay through NPCI’s BillPay on the bank’s net banking services for utility bills, postpaid mobile phone and credit card bills, and insurance premium payments. Likewise, you can visit your bank’s website to check the available alternative payment methods.

“In case you fail to approve a transaction greater than ??5,000, we strongly recommend that you contact your merchant / service provider and ask them to initiate a new authorization to keep your services active, ”ICICI Bank wrote in its FAQ section.

It is advisable to also contact your bank to check how long it will take them to complete the new requirements so that you can be sure of the number of months you are likely to need to make direct payments to merchants to continue to receive the benefits of. service.

Some large private banks such as ICICI, HDFC and Axis, as well as merchants such as Netflix, Policybazaar, Amazon Prime, Max Life Insurance and Hotstar, have already integrated into a common industry-wide platform.

However, the wait can be long for customers of other banks, especially those in the public sector. An official spokesperson for a fintech company working with banks on the issue told Mint that the State Bank of India could take another four to five months to comply with the new rules.

EMIs, SIPs are safe: “There will be no impact on recurring payments whose standing direct debit instruction comes directly from the bank account,” Gandhi said.

This would mean that your Equivalent Monthly Payments (EMI) on all your secured loans would not be affected by the new rules as they are debited directly from the savings account or checking account.

Since the automatic debit facility on systematic investment plans (SIPs) in mutual funds is also granted to the main bank through a single mandate or billing method, your SIPs will also not be affected.

Credit card bill, insurance premium in case of risk of non-payment: direct debit mandates on insurance premiums and credit card bills are usually given by card. You have to be very careful to pay these two on time and in full, as failing either one can cost you dearly.

Lack of a single insurance premium can result in the total loss of the policy and its benefits. Each insurance policy has a grace period of 15 to 30 days after the premium is due, so use this window to make payment.

Likewise, defaulting on a credit card will not only attract interest, but will also impact your credit score.

“These two payments are not like a SIP that you can skip for a month and yet there will be no impact on your overall investment portfolio,” said Amit Suri, a New Delhi-based financial planner.

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