In a move aimed at enhancing financial transparency and security, the Reserve Bank of India (RBI) has announced new regulations for cash pay-out services. These new rules, part of the updated ‘domestic money transfer’ framework, will come into effect on November 1, 2024.
Under the revised framework, banks are now required to maintain detailed records of beneficiaries receiving cash payments. This mandate includes the necessity for remitting banks to obtain and store the name and address of each beneficiary. This step is expected to strengthen the traceability and accountability of cash transactions, particularly for individuals without bank accounts who rely on these services.
The RBI’s updated guidelines also emphasize stringent Know Your Customer (KYC) protocols. The sending bank or business correspondent (BC) must register the sender using a verified cell phone number and a self-certified ‘officially valid document (OVD)’ as per KYC instructions. This measure is intended to curb fraudulent activities and ensure the authenticity of transactions.
Furthermore, the new rules stipulate that every transaction initiated by the sender must be validated through an additional factor of authentication (AFA). This additional security layer aims to bolster the safety of cash transactions, providing greater protection against unauthorized transfers.
Notably, these guidelines do not cover card-to-card transfers, which remain outside the scope of the current framework. This exclusion suggests that the RBI’s focus is particularly on cash pay-out services, a critical aspect of the financial ecosystem for unbanked and underbanked populations.
The implementation of these new rules marks a crucial step in the RBI’s ongoing efforts to enhance the integrity and security of the financial system in India. Banks and financial institutions are expected to comply with these regulations by the specified deadline, ensuring a smooth transition to the new norms.
