RBI’s new rules for Auto Debit to kick in from October 1st

You might have automated utility bill payments or renewal of OTT subscriptions like Netflix and Amazon Prime on your credit card. Until now, the amount was charged on your credit card every month/year automatically and you were intimated about the same via an SMS notification sent to your registered mobile number only after the transaction was completed. Things are going to change starting 1st October 2021.

What Are the New Auto Debit Rules?

As per the new guidelines issued by the RBI in its notification dated 31st March 2021, card issuers, starting October 1, 2021, shall be required to inform the cardholders regarding any auto-debit standing instruction on their credit cards at least 24 hours prior to the debit. In case the transaction amount exceeds Rs. 5,000, the cardholder will have to manually authenticate the transaction via an additional factor authentication (AFA) like OTP (one-time password).

Initially, the maximum transaction threshold for the requirement of additional factor authentication was set at Rs. 2,000 which was later increased to Rs. 5,000. The deadline for implementation of the new guidelines was also extended from March 31, 2021 to September 30, 2021 on request of the stakeholders- card issuers, payment networks and merchants.

As per the new guidelines, the cardholders will also be able to view and cancel any standing instruction(s) regarding auto-debit on their credit cards on the card issuer’s website itself (via net banking in most cases). Earlier, the only way to unsubscribe from a subscription-based service (like Netflix, Spotify, etc.) was through the merchant’s portal, now you can do the same on your card issuer’s website as well. This feature not only gives you additional security but also enables you to view and control all the auto-debit standing instructions on your credit card at one place.

The following chart summarises the changes in the processing of auto-debit standing instructions on credit cards w.e.f. 1st October 2021-

	For transactions less than or equal to Rs. 5,000		For transactions above Rs. 5,000
	New System	Old System	New System	Old System
Pre-transaction notification	Yes- at least 24 hours ahead of the transaction	No	Yes- at least 24 hours ahead of the transaction	No
Additional Factor Authentification	Authentication required for the first transaction only	Not required	Required for the first and all recurring transactions	Not required
Post-transaction notification	Yes	Yes	Yes	Yes
Cancellation facility on card issuer’s website	Yes	No	Yes	No

The new guidelines require merchants to initiate the transactions as per the new standards laid by the RBI, failing to do so shall result in the decline of the transaction by the card issuer. For the transactions to be processed as per the new standards, you need to re-register your credit card on the merchant’s website for auto-debit.

Bottom Line:

The aforementioned changes with regards to auto-debit transactions on credit cards not only enhance the security of your credit card as every transaction above Rs. 5,000 must go through an additional layer of authentication but also allow you to manage all the subscriptions currently active on your card at one place. Many times we signup for a free trial of a service and forget to cancel the subscription. In such a case, the credit card is auto-debited in the next billing cycle even if we don’t want to continue with the subscription. With the implementation of these new guidelines, you’ll be notified at least 24 hours ahead of any debit on your credit card account, thus avoiding any unintended transaction.

FAQs:

1.) Do I have to manually authenticate auto-debit transactions less than Rs. 5,000?

For auto-debit transactions less than Rs. 5,000, additional factor authentication (AFA) is required on the first-time transaction only. For subsequent transactions, a notification will be sent on your registered mobile number at least 24 hours ahead of auto-debit.

2.) I am currently subscribed to an OTT service, do I need to re-register my credit card on the merchant’s website?

Yes, for all auto-debit subscriptions active on your credit card, you need to register your card afresh on the merchant’s website.

3.) Can I cancel any of the active auto-debit subscriptions on my credit card on the card issuer’s website?

Yes, as per the new RBI guidelines, you can view and cancel any of the auto-debit subscriptions active on your credit card on the card issuer’s website itself.

4.) Are the new guidelines applicable on international auto-debit transactions?

Yes, the new RBI guidelines are applicable on both domestic as well as international auto-debit transactions on credit cards.

5.) What if the merchant does not initiate the transaction as per the new standards laid by the RBI?

In case of non-compliance to the RBI guidelines by the merchant, the card issuer is obliged to decline the transaction.