Domestic Money Transfer – Review of Framework
The framework for Domestic Money Transfer (DMT) was introduced in 2011 through the RBI circular DPSS.PD.CO.No.622/02.27.019/2011-2012 dated October 5, 2011. Since its inception, there has been a significant increase in the availability of banking outlets, developments in payment systems for funds transfers, and ease in fulfilling Know Your Customer (KYC) requirements. Users now have multiple digital options for transferring funds. A recent review of the existing services under this framework has led to several changes.
Cash Pay-out Service
- The remitting bank is now required to obtain and keep a record of the name and address of the beneficiary.
Cash Pay-in Service
- Remitting banks and Business Correspondents (BCs) must 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, which is amended periodically.
- Every transaction by a remitter must be validated by an Additional Factor of Authentication (AFA).
- Remitting banks and their BCs must comply with the provisions of the Income Tax Act, 1961 and the associated rules/regulations, which are amended from time to time, regarding cash deposits.
- The remitter bank must include remitter details as part of the IMPS/NEFT transaction message.
- The transaction message must include an identifier to denote that the fund transfer is cash-based.
The guidelines on Card-to-Card transfers are now excluded from the scope of the DMT framework and will be governed by the guidelines/approvals specific to such instruments. All other instructions from the circular dated October 5, 2011, including the limits on the size of transactions, will continue to apply.
This updated circular is issued under Section 18, read with Section 10 (2) of the Payment and Settlement Systems Act, 2007 (Act 51 of 2007), and will come into effect from November 01, 2024.
The DMT framework’s review highlights the importance of evolving regulations to keep pace with technological advancements and the increasing use of digital payment options. The introduction of additional authentication factors and the compliance requirements with tax regulations reflect a robust approach to enhancing security and accountability in domestic money transfers. As users continue to adopt digital methods for transactions, these updated guidelines aim to ensure a secure and efficient transfer process, maintaining the integrity of the financial system while adapting to modern needs.
The new guidelines and amendments seek to address the changing landscape of domestic money transfers, ensuring that the system remains secure, user-friendly, and compliant with current legal and regulatory standards. This proactive approach by the RBI is a step towards fostering a more secure and efficient financial ecosystem in India.
