RBI Tightens Rules for Domestic Money Transfers: New Guidelines for Cash Transactions and KYC
The Reserve Bank of India (RBI) has implemented stricter regulations governing domestic money transfers to effectively monitor both cash pay-in and pay-out services. In a circular issued on Wednesday, the RBI outlined key provisions aimed at enhancing security measures and ensuring compliance with Know Your Customer (KYC) guidelines.
Under the new guidelines, the remitting bank is required to obtain and maintain a record of the name and address of the beneficiary for cash pay-out services. Moreover, for cash pay-in services, remitting banks and business correspondents must register the remitter using a verified cell phone number and a self-certified ‘Officially Valid Document (OVD)’, in accordance with the Master Direction – Know Your Customer Direction 2016.
Additionally, every transaction carried out by a remitter will need to be validated by an Additional Factor of Authentication (AFA). The circular also emphasizes that remitting banks and their business correspondents must adhere to the provisions of the Income Tax Act, 1961, and the related rules and regulations regarding cash deposits.
Furthermore, the remitter bank is mandated to include remitter details as part of the Immediate Payment Service (IMPS) or National Electronic Funds Transfer (NEFT) transaction message. This transaction message must contain an identifier to distinguish the fund transfer as a cash-based remittance.
The RBI clarified that the guidelines on card-to-card transfers fall outside the scope of the Domestic Money Transfer (DMT) framework and will be governed by separate regulations specific to such instruments. Notably, these measures were introduced in light of the substantial growth in banking outlets, advancements in payment systems for funds transfer, and the simplification of KYC requirements since the inception of the DMT framework in 2011. Consequently, users now have multiple digital options for fund transfers.
The RBI’s decision to revise the existing framework follows a recent review of various services facilitated within the current system, marking a significant step towards fortifying the nation’s domestic money transfer landscape.
