The Reserve Bank of India (RBI) has announced new rules for Domestic Money Transfers (DMT), which will take effect from November 1, 2024. These updated guidelines are designed to improve the security, transparency, and accountability of money transfers within India, especially as digital transactions continue to rise.
Key Changes in the New Framework
The new framework comes with several important changes aimed at strengthening the financial system. One major update is the stricter Know Your Customer (KYC) norms for both banks and businesses involved in DMT services. These norms ensure that customers’ identities are properly verified to prevent fraud and money laundering.
- Enhanced KYC Requirements: Under the new guidelines, banks and business correspondents (BCs) will have to collect and verify more information about the customers making transfers. This includes ensuring that remitters provide a valid mobile phone number and an “Officially Valid Document” (OVD), like an Aadhaar card or passport.
- Cash Transfers and Beneficiary Information: One of the major changes is that banks are now required to keep a record of the beneficiary’s name and address for cash-based transfers. This will help ensure transparency and accountability in transactions. In the past, this requirement did not apply to all transfers, but the new rule will make it mandatory.
- Additional Authentication for Transactions: Another key feature of the updated rules is that every transaction will require additional authentication. This means that each time a person sends money, a second layer of security will be used to verify the transaction, making it harder for fraudulent activities to take place.
- Transparency in Charges and Processes: The new framework also requires DMT providers to be more transparent about the fees and charges associated with transfers. Customers will be informed in advance about how much they will be charged for a transfer, and how long it will take for the funds to reach the recipient.
- Cash Payout Services: For people who do not have a bank account, the RBI has set new rules for cash payout services. These services allow individuals to receive money in cash even if they do not hold a bank account. The amount that can be transferred to such beneficiaries has been raised from Rs. 5,000 to Rs. 10,000 per transaction, with a maximum cap of Rs. 25,000 per month. This change will make it easier for people in rural areas or those without bank accounts to receive money.
Impact on Customers
These new rules will have a significant impact on both customers and service providers. For customers, the extra KYC checks and additional authentication steps may require more time to complete transactions, but these measures are designed to protect their money and personal information.
Consumers will also benefit from the increased transparency around transfer charges and processing times. With these changes, they will have a clearer understanding of the costs involved and the time it will take for their money to reach the recipient.
While the updated regulations do not apply to card-to-card transfers, they will affect other types of transfers like IMPS, NEFT, and cash transfers. For people using cash pay-in services, the new requirements will make the process safer, ensuring that only authorized individuals are sending money.
What You Need to Do
- Update Your KYC Information: If you use DMT services, you should make sure your KYC information is up to date. Be prepared to submit additional documents like a valid ID proof and mobile number verification.
- Choose Trusted Providers: It is essential to use reputable and authorized DMT providers to ensure your transactions are safe and follow the updated regulations.
- Be Alert for Fraud: With additional authentication and KYC checks, it is important to remain vigilant and be cautious of scams. Do not share your personal information or make transfers without verifying the authenticity of the request.
The RBI’s new rules for Domestic Money Transfers are designed to enhance the security, transparency, and efficiency of money transfers in India. These changes will help prevent fraud, ensure better compliance with financial regulations, and make digital money transfers safer for consumers. As digital transactions continue to grow in India, these measures are essential to creating a secure environment for transferring money.
