RBI’s auto-debit rules to set in from Oct 1: Things to know

NEW DELHI: India’s top banks have been sending emails and coordinating with customers, ahead of the Reserve Bank of India‘s (RBI) mandatory changes on auto-debit rules from October 1.
Sources said, banks last week asked for more time from RBI to comply with the new rules.
But the central bank has refused, so it is possible that there is some level of disruption due to this, the sources said.
What are the standing instructions, bank customers normally set?
Payment of home loan, vehicle loan EMI, insurance premiums, school fees, subscription plans are among the most common standing instructions set by customers for auto-payment.
Since there will be no recurring auto payments from credit, debit cards and UPI from October 1, standing instructions for auto-debit will require additional authentication.
“Customers are instructed to watch for email, SMS communication from the bank. OTP will be sent for additional authentication for payments over Rs 5,000 if the preset standing instruction is non-compliant with new RBI rules,” said a bank manager at State Bank of India.
If a loan EMI is missed this month because of the new rule, will a customer’s credit score be affected?
No, the banks normally report loan default data only 30-45 days after the default. So if the person is able to pay the EMI due online or in person – then the temporary default will not be reflected in their CIBIL score.
Standing instructions for bank loans, insurance premiums should not be affected, as banks, insurance companies are among the few merchants for additional factor authentication has been enabled.
But payment of school fees, utility bills and subscription plans to other merchants would be.
Many banks have started publishing lists of authenticated merchants on their bank websites for customers’ benefit.
“It is highly likely that most banks (loan accounts, credit card dues) are already integrated with our technology infrastructure – so such transactions will be processed. But users will still have to go through a registration process and re-enter the validity period and maximum amount of the standing instruction,” added the bank manager.
How will bank’s debit notifications help?
Banks will send customers a debit notification with the amount and name of the merchant 24 hours before each payment.
The notification will contain a link that will allow users to modify or cancel the payment or the mandate. If they take no action, the transaction will be carried out as usual.
What if a bank fails to send the notification?
If in case the bank has failed to communicate with customers, then customers should be proactive in many payments directly to merchants to avoid defaults.

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