The Reserve Bank of India (RBI) has recently updated Domestic Money Transfer – Review of Framework vide its circular dated 24.07.2024 bearing RBI/2024-25/52 CO.DPSS.POLC.No.S415/02.27.019/2024-25. The said circular is issued to Authorised Payment System Operators/ Participants (Banks and Non-Banks). The circular will be in effect from 01.11.2024.
The reason attributed to such a review was a significant increase in the availability of banking outlets, developments in payment systems for fund transfers, ease in fulfilling KYC requirements, and multiple digital options for funds transfer.
The following changes (marked in bold) have been made by the RBI in different modes of domestic transfer in its review under the circular dated 24.07.2024:
(1) Cash Pay-out Service: Banks enable the transfer of funds from customers’ accounts to recipients (beneficiaries) not having bank accounts. The value of the transfer is INR 10,000 per transaction subject to a cap of INR 25,000/- per month.
Upon review RBI mandates remitting banks to obtain and keep a record of details of beneficiaries. In the earlier directive, there was no provision for the remitting bank to keep a record.
(2) Cash Pay-in Service: Banks enable walk-in customers without bank accounts (migrant workers) to transfer funds to bank accounts (family members) of INR 5,000/- per transaction subject to INR 25,000/- per month.
Upon review, RBI mandates stricter reforms for this mode of domestic transfer as follows:
a. Remitting banks/ Business Correspondents shall register the remitter (walk-in customer) based on a verified cell phone number and a self-certified ‘Officially Valid Document (OVD)’ as per Know Your Customer Directions 2016.
b. Every transaction by a remitter (walk-in customer) to be validated by an Additional Factor of Authentication (AFA).
c. Remitting banks and their BCs shall conform to provisions of the Income Tax Act, 1961, and rules thereunder.
d. Remitter bank shall include remitter details as part of the IMPS/NEFT transaction message.
e. Transaction message shall include an identifier to identify the fund transfer as a cash-based remittance.
(3) Card-to-Card Transfer: The cards (credit/debit/prepaid)-to-card transfer of funds has been enabled in a manner that ensures underlying characteristics of the card are retained.
The RBI has excluded guidelines on Card-to-Card transfer from the purview of the DMT framework and will instead follow the guidelines/approvals granted for such instruments.
The framework for domestic money transfer was introduced in 2011 vide directive dated 05.10.2011 applicable to all scheduled commercial banks including RRBs, Urban Co-operative Banks, State Co-operative Banks, District Central Co-operative Banks, and Authorised Card Payment Networks.
The purpose of such a framework is to address the large number of people, particularly the migrant population not having access to formal banking channels for want of proof of identity/address. This framework was issued to provide money transfer facilities in a safe, secure, and efficient manner across India.
The review ensures additional security measures to further safeguard the money transfer transactions and ensure the legitimacy of parties involved to prevent any fraud.
The regulations are expected to enable customer services to the desired segment effectively by adhering to the principles contemplated there.
