The Reserve Bank of India (RBI) rolled out a new framework for domestic money transfers (DMT) in July 2024, targeting regulated businesses. The updated guidelines focus on strengthening Know Your Customer (KYC) registration standards and fine-tuning banking services and payment systems. These new guidelines come into effect on November 1, 2024.

The aim of the revised regulations is to strengthen the security of domestic money transfers and ensure compliance with current financial laws. In light of the increasing prevalence of digital and cashless transactions in India, the intention is to provide a robust and secure structure for money transfers.

The changes to the existing framework are the result of a careful evaluation of different payment transfer services. As per a communication issued by the Reserve Bank of India to authorized payment system operators, remitting banks are now required to obtain and maintain a record containing the name and address of the beneficiary for cash disbursements. Additionally, every transaction initiated by a sender must be validated via an additional authentication factor (AFA).

The RBI in its July circular said, “The framework for domestic money transfer (DMT) was introduced in 2011, as per RBI circular DPSS.PD.CO.No.622/02.27.019/2011-2012 dated October 5, 2011. Since then, there has been a significant increase in the availability of banking outlets, developments in payment systems for fund transfers and the ease of meeting KYC requirements, etc. ; and now users have multiple digital options for transferring funds. A review has recently been undertaken into various services facilitated under the current framework.

Key details

1. Banks are required to maintain a record of the name and address of the beneficiary during money transfers to promote transparency and accountability in financial transactions.
2. Banks and Business Correspondents (BCs) are required to verify the sender’s mobile number and relevant documents.
3. Money transmitters will be subjected to the registration process using an authenticated mobile number and a self-certified “Officially Valid Document” (OVD) as per the guidelines laid down by the Reserve Bank of India (RBI).
4. The new framework requires remitting banks to retain the name and address of beneficiaries of cash payment services to improve traceability and accountability in cash transactions.
5. These measures were implemented to strengthen oversight and accountability in cash transactions.
6. Additional authentication will be required for each transaction.
7. Remitting banks and their CBs must follow the rules of the Income Tax Act regarding cash deposits.
8. Issuing banks must include sender details in the transaction message on systems like IMPS and NEFT.
9. Cash fund transfer transactions must have a specific identifier in the message.
10. For cash payment service, the remitting bank has been required to obtain and maintain a record of the name and address of the beneficiary.

Impact on customers

> In order to use cash payment services, banks and business correspondents are required to register remittance senders with a verified mobile number and a self-certified Officially Valid Document (OVD), as per the Prime Directive – Know your customer (KYC). Direction 2016.

> This measure is implemented to strengthen identity verification procedures and mitigate the risks linked to possible incidents of fraud.

> It is important to note that the updated guidelines do not apply to card-to-card transfers, as they will continue to be governed by existing regulations specific to these transactions.

Cash payment services

Cash payment refers to the transfer of funds from bank accounts to beneficiaries who do not have bank accounts. The cash payment process involves the transfer of funds from bank accounts to people who do not have their own bank accounts. In 2011, the central bank issued a statement allowing banks to offer services that allow customers to transfer funds from their accounts for cash delivery to recipients without a bank account at an ATM or through a designated agent called commercial correspondent. The maximum amount allowed for such transfers has been increased from Rs. 5,000 to Rs. 10,000 per transaction, with a monthly cap of Rs. 25,000.

“Banks are permitted to provide services that facilitate the transfer of funds from their customers’ accounts for delivery in cash to recipients who do not have a bank account at an ATM or through an agent designated as a business correspondent . It has been decided to increase the ceiling on the value of these transfers from Rs. 5,000 to Rs. 10,000 per transaction subject to the ceiling of Rs. 25,000 per month,” the RBI had said.