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From April 1, Banks To Decline Auto Pay Transactions: Here’s All You Need To Know


From tomorrow, April 1, 2021, regular automatic payments using debit and credit cards, prepaid Payment Instruments (PPIs), or the Unified Payments Interface (UPI) will be influenced. This change contradicts the Reserve Bank of India's directive to all banks, including RRBs, NBFCs, and payment gateways, that the processing of recurring transactions (domestic or cross-border) under arrangements/practices that aren't compliant with additional factor authentication (AFA) will be phased out after March 31, 2021. This law is likely to have an effect on monthly subscription fees for streaming services such as Netflix, Amazon Prime, Disney+Hotstar, as well as mobile and utility bills. Customers who use automatic recurring payments will now be required to complete a one-time registration process with AFA authorization, according to the central bank's current regulation. This new provision only applies to recurring amounts of more than Rs 5,000. Only transactions above Rs 5,000 will require Additional Factor of Authentication (AFA). Here's what you need to know from tomorrow i.e. April 1, 2021.

From April 1, Banks To Decline Auto Pay Transactions: All You Need To Know

This reflects the Reserve Bank of India's decision on April 1 to allow Additional Factor of Authentication (AFA) for recurring transactions exceeding Rs 5,000 using debit, credit cards, Prepaid Payment Instruments (PPIs), or Unified Payments Interface (UPI). This implies that you won't be able to use Netflix, Amazon Prime, or other OTT platforms' autopay feature any longer. From April 1, any recurring transaction of more than Rs 5,000 to any merchant would entail this Additional Factor of Authentication.

  • On August 21, 2019, the RBI agreed to allow recurring transactions in the range of Additional Factor of Authentication, based on standing instructions provided to merchants by cardholders. The RBI claimed at the period that the rule applied to transactions made with all forms of cards, including debit, credit, and prepaid payment instruments (PPIs), like wallets.
  • Earlier, the RBI had enabled transactions worth up to Rs 2,000 to be excluded from e-mandate-based recurring transactions without the need for an AFA. This cap was increased to Rs 5,000 in a notification released on December 4, 2020. According to the RBI, the cardholder will also be entitled to "opt-out" of a specific transaction.
  • The RBI announced on December 4, 2020 that the processing of recurring transactions (domestic or cross-border) using cards, PPIs, or UPI under arrangements or practises that are not consistent with the aforesaid directions will not be continued after March 31, 2021.
  • Banks will be allowed to notify customers in advance of recurring payment due, and transactions will be carried out only when the customer has granted his or her approval. The customer will choose the mode of notification when registering the e-mandate for recurring payments. RBI declared this move to enhance the security and reliability of card transactions as part of a risk reduction strategy.

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