Auto debit rule: ICICI, Axis and HDFC assure continuity of services

Three of India’s largest private lenders – HDFC Bank, and Axis Bank – said they will meet the Reserve Bank of India’s mandate for recurring payments ahead of the October 1 deadline. The commitment was given by the respective bank spokespersons and communications sent by the lenders to customers.

The development comes at a time when India’s payments ecosystem, online merchants and consumers are anticipating large-scale disruption in recurring payments through debit and credit cards owing to new central bank rules.

According to sources, these banks are working with payment aggregators Razorpay and BillDesk to integrate with a common e-mandate platform that will ensure compliance. Reserve Bank of India’s (RBI) new rules mandate that banks can only process auto-debit transactions if they send a pre-debit notification to customers at least 24 hours before the payment. “‘We will be going live in the next 2-3 days, complying with RBI guidelines,” said Sanjeev Moghe, EVP & head – cards & payments, Axis Bank. A spokesperson at ICICI Bank said the bank will go live with a compliant system from October 1. HDFC Bank didn’t respond, but as per a customer communication reviewed by ET, the lender is also working toward compliance.

“A common industry-wide platform has been developed, and HDFC Bank has completed its internal development and integration,” the communication by HDFC Bank stated. “We are now working jointly with merchants to make it live for customers at the earliest.”

Several banks had earlier expressed their inability to comply with this rule earlier this year. The central bank has already postponed the implementation of this rule in March 2021 in a sternly worded circular which said non-compliant banks processing such transactions after September 2021 would face strict regulatory action.

The new rule also states that auto-transactions above ₹5,000 will require a separate flow that would need customers to authenticate such payments manually with a One Time Password (OTP). In fact, some of India’s largest internet merchants – Google, Facebook, YouTube – have over the last few days communicated to the customers that the new rules can lead to large scale disruptions in e-mandate based recurring payments. Others likely affected would include financial services providers, OTT platforms, telecom operators and news media.

It could not be immediately determined whether other mass market lenders including State Bank of India would ensure compliance. SBI and RBI too didn’t respond.

However, despite these claims by banks, industry sources expressed apprehensions about the timelines. According to an executive, many of the large banks could likely miss the deadline owing to procedural delays and procurement related issues.