RBI‘s new Additional Factor Authentication (AFA) regulations for auto-generated transactions will see proper functioning from October 1, 2021. Banks are obliged to notify their customers and take their consent before every auto-debit transaction. This norm applies to the population using credit and debit cards, unified payments interface (UPI), and digital wallets for monetary transactions.
RBI’s new Additional Factor Authentication (AFA) norms
People who have authorized their repeated payments through internet banking for paying phone recharge, OTT, and utility bills will be unaffected.
Systematic Investment Plan (SIP) transactions will also remain unaffected by the Additional Factor Authentication (AFA) guidelines. This is owing to the medium of SIP transactions via the National Automated Clearing House (NACH) decree, which is directly controlled by the RBI. Hence, investors who continue to facilitate SIP payments in broking firms like Upstox, Motilal Oswal, Angel Broking, Zerodha, and Groww, can remain at ease with regards to their SIP payments.
A spokesperson at Zerodha said to the Business Insider that the firm uses an e-mandate capability on the NPCI NACH portal to make auto-debits accessible to their consumers. As the auto-generated transactions are authorized by the consumer using their bank account, the new RBI norms do not affect their channel. All prevalent and newly made auto-generated transactions will be facilitated similarly as before, he said.
An e-mandate is an existing feature started by the RBI and the National Payments Corporation of India (NCPI). It allows traders to accumulate repeated payments of up to INR 5,000. For payments beyond the INR 5,000 mark, banks will need an extra network for authentication as they are not entitled to e-mandate centric recurring transactions. This is also due to SEBI’s rule of not allowing stock brokerage companies to accept credit or debit cards from consumers to make transactions via the investment portal.
Fundamentally, the new Additional Factor Authentication (AFA) norms need consumers to choose an e-mandate facility via a single registration procedure, which can only be validated via a one-time password (OT), apart from entering their bank account/card/UPI particulars. Consumers will also be given the choice to modify, pause or cancel their repeating transactions.
People that have been making transactions to any OTT platform like Netflix will have to set up an e-mandate.
Under RBI’s new Additional Factor Authentication regulations, bank authorities will have to compulsorily update their consumers in advance about repeated payments that are due.
Single registration procedure
According to the new Additional Factor Authentication RBI guidelines, consumers will have to register themselves in a single procedure. This procedure will be necessary only once. Post-registration, transactions can be accomplished without authentication. Whilst registering, consumers will deliver the validity period for forthcoming transactions.
Recurring payments above INR 5,000
For repeated transactions above the INR 5,000 mark, banks will provide an OTP to consumers, according to the new Additional Factor Authentication RBI guidelines.
The choice of opting out
According to the new Additional Factor Authentication RBI norms, users will have the choice to opt-out of a transaction or mandate through the web link provided in the pre-debit statement.
What kind of transactions will remain unaffected?
Mutual funds, monthly installments for loans, and SIPs will remain unaffected by the RBI’s new Additional Factor Authentication guidelines.
RBI’s motive for refabrication of norms
RBI stated that the Additional Factor Authentication guidelines have made digital transactions in India secure. The foundational objective of the Additional Factor Authentication guidelines is to protect consumers from deceitful transactions and improve the convenience of the consumer.