Irate RBI Extends Deadline For New Auto-Debit Rules Once Again

Amid concerns that a new set of auto debit rules kicking-in on April 1 will lead to large scale disruption in payments, the Reserve Bank of India decided to delay their implementation by six months. The new rules, first issued in August 2019, will now kick-in starting October 2021.

In a terse statement, the regulator said that the “non-compliance is noted with serious concern and will be dealt with separately.” It, however, said that the delay in putting in place systems to deal with the new rules could lead to wide scale customer convenience.

During the extended timeline, no new mandate for recurring online transactions shall be registered unless such mandates are compliant with the framework, the regulator said in a separate notification.

The RBI added that any further delay in ensuring complete adherence to the framework beyond the extended timeline will attract “stringent supervisory action.”

In an August 2019 circular, the RBI said that as “a risk mitigant and customer facilitation measure,” the issuer shall send a pre-transaction notification to the customer, at least 24 hours prior to the actual charge by SMS or email, as per the customer's preferences.” On receipt of the pre-transaction notification, the customer shall have the facility to opt-out of that particular transaction or the e-mandate, the RBI said.

The industry, however, said that it was not ready to implement the new order and warned that this could lead to auto debit transactions failing widely.

“This is a welcome move. Plans to comply with the notification were already underway and the extension of six months is more than sufficient time for integration across all service operators and all relevant parties,” said Jorty Chacko, executive director at IDBI Bank said.

Ahead of the implementation, Vishwas Patel, chairman of the Payments Council of India, had told BloombergQuint that a system called the ‘Standing Instructions Hub' is currently in the works and is being built by some private banks. This, when ready, could provide a common platform via which auto debit transactions can be routed. Other stop-gap arrangements being considered by banks including payments via Bharat Bill Pay, Billdesk and UPI, among others.

The RBI, in its release, said that the “primary objective of the framework was to protect customers from fraudulent transactions and enhance customer convenience.”

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