The Reserve Bank of India has decided to push the deadline for implementing new rules on recurring transactions by another six months!
Prior to this announcement, India’s apex bank said that the new rules would kick in starting April 1 under which every bank is required to send out a notification to customers one day before their automatic payments are due, along with an option of opting out.
But, because the RBI wants to prevent any scope of large scale convenience, in a circular released on March 31, it has mentioned the date of implementing the rules has now been moved to October 2021.
In the circular, the RBI also mentioned that the present non-adherence has been noted with serious concern and will be dealt with separately. And, going forward, if the central bank observes any further delay in banks ensuring complete compliance to the framework, they will attract strict supervisory action upon themselves.
Before the news of the delay surfaced earlier this week, banks such as SBI, Axis Bank, HDFC Bank and ICICI Bank, and several card companies, including American Express and MasterCard, failed to comply with the new rules released by RBI. Thus, as a result, they were going to decline all recurring payments for the month of April.
If the RBI had not extended the deadline and given more wiggle room to banks so that they can adjust to the new rules related to recurring payments, transactions over a whopping Rs 2000 crores were all set to be disrupted in the month of April.
Note here that RBI first issued the framework of processing e-mandates on recurring online transactions in August 2019. It was initially only applicable on cards and digital wallets, and then it went on to get extended to UPI transactions in January 2020 until the latest announcement.
But that being said, according to industry insiders, most banks in India are yet to upgrade their systems to comply with the new rule. The RBI, besides mandating that consumers be notified of auto-payments, also said that recurring payments over 5,000 would need banks to send customers a one-time password aka OTP, for processing the transaction.
The Indian central bank views the requirement of this additional factor of authentication aka AFA, as a safety and security measure, which is also one of the primary objectives of the new framework to be put in motion in the near future.
All in all, it is well understood that the extension is meant to bring relief to the millions of people who use recurring payments for paying utility bills, subscription services and more. It now remains to be seen how effectively can Indian banks upgrade their existing infrastructure to include these changes to ensure compliance with RBI’s new rules. We will keep you updated on all future developments. Until then, stay tuned.