The Reserve Bank of India (RBI) has introduced stringent regulations on cash pay-out services, mandating banks to maintain comprehensive records of recipients. Cash payments involve transferring funds from bank accounts to individuals without bank accounts.
RBI’s Updated Framework for Domestic Money Transfer
The RBI has revised its October 2011 framework for ‘domestic money transfer’ to incorporate these new record-keeping requirements.
Implementation of New Rules from November 1, 2024
The enhanced rules are set to be enforced from November 1, 2024. Specifically for cash pay-out services, the revised framework stipulates that, “The remitting bank shall obtain and retain a record of the name and address of the beneficiary.”
In the context of cash payment services, the RBI has outlined that the sending bank or business correspondent (BCs) will register the sender using a verified cell phone number and a self-certified ‘officially valid document (OVD)’ in accordance with the Know Your Customer (KYC) instructions.
Additional Factor of Authentication (AFA) and Transaction Detail Inclusions
The updated regulations also mandate that every transaction initiated by the sender must undergo validation through an additional factor of authentication (AFA). Furthermore, the sender’s bank is required to incorporate the sender’s details as part of the IMPS/NEFT transaction message, as stated by the RBI.
Notably, the guidelines on card-to-card transfers fall outside the purview of this framework.
Ongoing Compliance and Implications
These new regulations signify the RBI’s commitment to bolstering transparency and security within the domestic money transfer ecosystem. By enforcing stringent record-keeping and authentication processes, the central bank aims to mitigate the risks associated with cash pay-out services and ensure the safeguarding of financial transactions.
Banks and financial institutions operating within India are urged to familiarize themselves with the updated framework and gear up for compliance with the new rules. The November 1 deadline requires prompt action to ensure a seamless transition to the revised regulations.
In conclusion, the RBI’s revised rules for cash pay-out services underscore the evolving landscape of financial regulations, emphasizing the imperative to uphold and fortify the integrity and accountability of money transfer practices.
Conclusion
The enhanced rules for cash pay-out services introduced by the RBI mark a significant milestone in upholding the integrity and security of financial transactions. As the deadline for implementation approaches, the onus is on financial institutions to align themselves with the revised framework to ensure seamless compliance and adherence to the updated regulations.
