The Reserve Bank of India (RBI) had issued a new framework on Domestic Money Transfer (DMT) in July 2024 for regulated enterprises, requiring stronger Know Your Customer (KYC) record standards and focusing on banking services and payment systems.
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The new guidelines are effective from November 1, 2024, as per the RBI’s July 24, 2024 circular.
The revised regulations are intended to improve the security of domestic money transfers and ensure compliance with current financial laws. These efforts aim to provide a strong and secure framework for money transfers within India as cashless and digital transactions continue to advance.
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“The framework for Domestic Money Transfer (DMT) was introduced in 2011, vide RBI circular DPSS.PD.CO.No.622/02.27.019/2011-2012 dated October 5, 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. A review was recently undertaken of various services facilitated in the current framework,” according to the RBI circular dated July 24, 2024.
According to the RBI, based on the review, the following changes are being made:
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a) Cash Pay-out Service
The remitting bank shall obtain and keep a record of the name and address of the beneficiary.
b) Cash Pay-in Service
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.
Every transaction by a remitter shall be validated by an Additional Factor of Authentication (AFA).
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Remitting banks and their BCs shall conform to provisions of the Income Tax Act, 1961 and the rules / regulations framed thereunder (as amended from time to time), pertaining to cash deposits.
Remitter bank shall include remitter details as part of the IMPS / NEFT transaction message.
The transaction message shall include an identifier to identify the fund transfer as a cash-based remittance.
Note that the guidelines on card-to-card transfer are excluded from the scope of the DMT framework and shall be governed by the guidelines/approvals provided for such instrument.
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What is cash payout service
Cash pay-out refers to transferring funds from bank accounts to beneficiaries who do not have a bank account. According to the RBI circular dated October 5, 2011, “banks are permitted to provide services which facilitate transfer of funds from the accounts of their customers for delivery in cash to the recipients not having bank accounts at an ATM or through an agent appointed as Business Correspondent. It has been decided to raise the ceiling on the value of such transfers from Rs. 5,000 to Rs. 10,000 per transaction subject to the cap of Rs. 25,000 per month. It has been further decided to permit banks to facilitate such fund transfers through any other authorized payment channels as well. The remitting bank shall obtain full details of the name and address of the beneficiary.”
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What is cash pay-in scheme?
According to the RBI circular dated October 5, 2011, “a walk-in customer at a bank branch can remit funds up to Rs. 50,000 to the bank account of a beneficiary through NEFT. Besides, banks are also permitted to allow such customers to transfer funds to a Bank account of a beneficiary through BCs, ATMs, etc. up to a maximum amount of Rs.5,000 per transaction with a monthly cap of Rs. 25,000. Such a walk-in customer needs to provide minimum details like his name and complete address to the remitting bank.”
