RBI makes KYC norms stricter for domestic money transfers

The Reserve Bank of India (RBI) has revised its regulations for domestic money transfer (DMT) services, enforcing stricter Know Your Customer (KYC) record-keeping requirements. The new framework mandates that remitting banks must obtain and maintain records of the beneficiary's name and address for cash payouts.

"The framework for Domestic Money Transfer (DMT) was introduced in 2011. There has been significant increase in the availability of banking outlets, developments in payment systems for funds transfers, and ease in fulfilling KYC requirements etc., since then; and now users have multiple digital options for funds transfer," RBI states.

In a communication to authorised payment system operators, the RBI emphasised that each remitter transaction must be validated by an additional factor of authentication (AFA). This update follows a review of the current payment and money transfer services framework, which has seen significant growth in banking outlets, advancements in payment systems, and simplified KYC requirements since the introduction of domestic money transfer rules in 2021. Under the revised regulations, remitting banks and business correspondents (BCs) must register remitters using a verified cell phone number.

"Remitting banks / Business Correspondents (BCs) shall register the remitter based on a verified cell phone number and a self-certified ‘Officially Valid Document (OVD)’ as per the Master Direction – Know Your Customer Direction 2016, as amended from time to time," the apex bank says.

The remitting bank is also required to include remitter details in IMPS/NEFT transaction messages, with a specific identifier for cash-based remittances. Additionally, both remitting banks and BCs must comply with the provisions of the Income Tax Act, 1961, and related rules and regulations regarding cash deposits.

"The guidelines on Card-to-Card transfer are excluded from the purview of the DMT framework and shall be governed under the guidelines / approvals granted for such instruments," RBI adds.

Additionally, in the full Budget presented on Tuesday, the Centre reduced the fiscal deficit target for 2024-25 to 4.9% of GDP, down from the 5.1% projected in the interim Budget in February. This adjustment was made possible by utilising an additional ₹1.3 lakh crore in dividends from the RBI to lower borrowings and allocate extra funds for development and welfare schemes.

The Budget introduced a new regime starting in FY27, this regime will prioritise an annual reduction in the debt-GDP ratio, aiming to maintain the fiscal deficit below 4.5% of GDP to support the fastest-growing major economy amid global uncertainties.

"The fiscal consolidation path announced by me in 2021 has served our economy very well, and we aim to reach a deficit below 4.5% next year. The government is committed to staying the course. From 2026-27 onwards, our endeavour will be to keep the fiscal deficit each year such that the central government debt will be on a declining path as a percentage of GDP,” Finance Minister Nirmala Sitharaman said.