RBI Imposes New Auto-Debit Rules Said to be More Secure

24 Jan 2023
5 min read

News Synopsis

Latest Updated on 24 January 2023

The Reserve Bank of India raised the limit on the number of recurring transactions that may be made via e-mandate without requiring extra-factor authentication from 5,000 to 15,000 rupees. Clients will be able to use their Debit Card or Credit Card for higher-value transactions like paying for School or Insurance Premiums without the need for an extra authentication factor like an OTP.

In a notice dated June 16, 2022, the Central Bank stated: "A reference is invited to our circulars DPSS.CO.PD.No.447/02.14.003/2019-20 dated August 21, 2019, DPSS.CO.PD No.1324/02.23.001/2019-20 dated January 10, 2020, DPSS.CO.PD No.754/02.14.003/2020-21 dated December 04, 2020, and CO.DPSS.POLC.No.S34/02

In order to complete the first transaction for e-mandates or standing instructions on cards, Prepaid Payment Instruments, and the Unified Payments Interface the e-mandate architecture required an Additional Factor of Authentication. The prescription of AFA was waived for subsequent transactions with transaction amounts up to Rs 5,000. The decision to increase the stated AFA limit from Rs 5,000 to Rs 15,000 per transaction was made after a study of the e-mandate framework's implementation and consumer protection options.

As of October 1, 2021, the e-mandate for recurring transactions is in force. According to the central bank, if the auto-debit mandate for the payment is greater than Rs 5,000, banks and other financial institutions must request extra-factor verification from their clients. If the e-mandate is for regular payments of more than Rs 15,000, this extra verification will now be necessary.

Last Updated on 01 October 2021

Since 2014, when the center abruptly announced demonetization making the old 500 and 1000 rupees note redundant, India is slowly moving towards a cashless economy. The pillars of a cashless economy lie in Online Payment and banking. Over the course of 5-6 years, more people have accepted this mode of payment rather than a traditional payment. To ensure that this move towards a cashless economy moves at a steady pace, the RBI announced new Debit-rules earlier this year. It made the automatic recurring payment redundant and asked all the banks to send an OTP to the individual withdrawing more than 5,000 rupees. Apart from them, there are a bunch of other rules too that the RBI had asked all the banks to follow accordingly. 

However, since the banks were not ready, they asked for some time and so the new rules have finally been implemented today. From today onwards no automatic recurring payment will take place. The reason behind such a huge move is to ensure that people are safe and so is their money. Since the internet is packed with hackers and scammers, the risk to online banking has increased substantially. RBI has said that it is because of all these reasons that they have finally come up with a policy that is perhaps more rigid and strict in terms of online safety. 


TWN In-Focus