The Reserve Bank of India ( RBI ) has recently introduced a revised framework for Domestic Money Transfer ( DMT ) aimed at regulated entities, imposing stricter Know Your Customer ( KYC ) norms, focusing on banking services and payment systems.
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Scheduled to be implemented from November 1, 2024, these updated guidelines mark a significant step in ensuring compliance with current financial regulations and enhancing the security of domestic money transfers amidst the burgeoning landscape of digital transactions.
Read More Here: RBI Strengthens Norms for Cash Pay-Outs at Banks
In a circular dated July 24, 2024, the RBI highlighted the proliferation of banking outlets, advancements in payment systems, and the growing ease in meeting KYC requirements. These developments necessitated a review of the existing framework to align with evolving digital payment options. The revised rules are intended to provide a robust and secure framework that supports the transition towards cashless transactions within India.
Get the Complete Handbook on Income Tax Rules with relevant Case Laws and Free E-Book Access here.
Earlier, the Reserve Bank had issued a circular, stating as to how NBFCs are to strictly adhere to the cash disbursement limits set by the Income Tax Act, 1961. This effectively places a cap of ₹20,000/- on cash loans disbursed by NBFCs.
Read More: Restriction on Disbursements of Loans in Cash: RBI directs NBFCs to Limit Loan Amount to Rs. 20,000
Key changes under the new framework, effective November 1, 2024, include:
1. Cash Pay-out Service: Remitting banks must record and retain beneficiary details, including name and address.
2. Cash Pay-in Service: Remitters must be registered using a verified mobile number and an Officially Valid Document ( OVD ) as per the updated Master Direction – Know Your Customer 2016.
3. Additional Factor of Authentication ( AFA ): Every transaction by a remitter requires validation through an AFA.
4. Compliance with Income Tax Act, 1961: Remitting banks and their Business Correspondents ( BCs ) must adhere to provisions related to cash deposits under the Income Tax Act, 1961.
5. Remitter Details: Remitter information should be included in the IMPS / NEFT transaction message.
6. Cash-based Remittance: Transactions designated as cash-based remittances must be clearly identified in the transaction message.
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According to an RBI notification from October 5, 2011, walk-in customers at bank branches can transfer up to Rs. 50,000 via NEFT to a beneficiary’s account. Additionally, customers can transfer funds through BCs, ATMs, etc., up to Rs. 5,000 per transaction with a monthly cap of Rs. 25,000, requiring minimal details such as name and address.
The guidelines explicitly exclude Card-to-Card transfers from the DMT framework, stipulating that they are governed by specific guidelines and approvals.
In conclusion, the RBI’s updated DMT framework represents a proactive step towards bolstering the security and efficiency of domestic money transfers amidst the rapid digitization of financial services. These measures are designed not only to comply with regulatory requirements but also to foster a safer and more seamless digital payment ecosystem across India.
Get the Complete Handbook on Income Tax Rules with relevant Case Laws and Free E-Book Access here.
