RBI Tightens KYC And Authentication Rules For Domestic Money Transfers

(MENAFN- KNN India) Mumbai, Jul 25 (KNN)
In a significant move to enhance financial security and streamline monetary transactions, the Reserve Bank of India (RBI) has announced a comprehensive revision of its regulations governing domestic money transfer (DMT) services.

This update, which comes more than a decade after the initial framework was established in 2011, introduces stricter Know Your Customer (KYC) requirements and additional authentication measures.

Under the new regulations, remitting banks are now required to obtain and maintain records of beneficiaries' names and addresses for cash payouts. This enhanced KYC record-keeping is aimed at improving transparency and reducing the risk of fraudulent transactions.

To further bolster security, the RBI has mandated that each remitter transaction must be validated using an additional factor of authentication (AFA).

This extra layer of security is expected to significantly reduce the likelihood of unauthorised transfers and protect consumers fr0m potential financial fraud.

The revised framework also stipulates that banks and business correspondents (BCs) must register remitters using a verified cell phone number and a self-certified 'Officially Valid Document' (OVD).

This measure is designed to create a more robust system for identifying and verifying the individuals involved in money transfer transactions.

In addition, remitting banks are now required to include remitter details in IMPS/NEFT transaction messages, with a specific identifier for cash-based remittances. This change will enhance the traceability of transactions and aid in monitoring and auditing processes.

Both remitting banks and BCs must also adhere to the provisions of the Income Tax Act, 1961, and related rules regarding cash deposits. This requirement aligns the DMT framework with broader financial regulations and helps prevent potential tax evasion or money laundering activities.

The RBI cited significant developments in the financial landscape since 2011, including increased banking outlets, advancements in payment systems, and simplified KYC procedures, as reasons for the update.

The central bank emphasised that users now have multiple digital options for fund transfers. It's worth noting that card-to-card transfers are excluded fr0m this framework and will continue to be governed by separate guidelines.

In related financial news, the government has set ambitious fiscal targets in its recently presented full Budget. The fiscal deficit target for 2024-25 has been reduced to 4.9 per cent of GDP, down fr0m the 5.1 per cent projected in the interim Budget.

This adjustment was made possible by leveraging an additional Rs 1.3 lakh crore in dividends fr0m the RBI, allowing for lower borrowings and increased allocation to development and welfare schemes.

Looking ahead, the government has introduced a new fiscal regime starting in FY27. This regime aims to prioritise annual reductions in the debt-GDP ratio while maintaining the fiscal deficit below 4.5 per cent of GDP.

These measures are designed to support India's position as the fastest-growing major economy amidst global economic uncertainties.

(KNN Bureau)

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