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RBI explores safeguards in digital payments to curb frauds
RBI's discussion paper on digital payment frauds
The Reserve Bank of India (RBI) has released a discussion paper inviting stakeholder comments on proposed measures to curb digital payments fraud by May 8, 2026.
India's digital payments ecosystem has expanded exponentially, with transaction volumes rising nearly 38 fold over the past decade. However, this growth has been accompanied by a sharp rise in fraud, particularly Authorised Push Payment (APP) fraud, in which users themselves initiate transactions under deception. Reported cases have surged from 2.6 lakh in 2021 to 28 lakh in 2025, involving approximately INR 22,931 crore. Unlike system breaches, APP frauds rely on social engineering, impersonation, and psychological manipulation, making them difficult to detect and nearly impossible to reverse in real-time payment systems such as Unified Payments Interface (UPI), Immediate Payment Service (IMPS), National Electronic Funds Transfer (NEFT), and Real-Time Gross Settlement (RTGS).
Against this backdrop, as post-transaction remedies remain limited, the RBI is exploring regulatory interventions that deliberately introduce friction into an otherwise instantaneous payments ecosystem. Accordingly, the RBI's regulatory approach is pivoting towards:
- Pre-transaction intervention, by creating time buffers for user reconsideration.
- Risk-based authentication, particularly for high-value or high-risk transactions.
- User empowerment, through configurable controls and safeguards.
Key proposed safeguards
- 'Lagged' credit for high-value transactions: The RBI proposes a mandatory one-hour delay for APP transactions above INR 10,000, applied at the payer's end. During this window, customers may cancel transactions, and banks may flag suspicious activity. The objective is to introduce a 'cooling-off' period that relieves the psychological pressure exerted by fraudsters and enables intervention at the critical early stage of fraud.
- Trusted person' authentication for vulnerable users: For individuals aged 70+ and persons with disabilities, an additional authentication layer is proposed for transactions above INR 50,000. A designated 'trusted person' would act as a secondary approver, mitigating risks arising from coercion or impersonation-based fraud, which disproportionately affect vulnerable segments.
- Restricting credits to low-verification accounts: To curb the use of mule accounts in fraud chains, the RBI proposes capping annual credit limits (indicatively INR 25 lakh) for accounts that lack enhanced due diligence. Credits exceeding this threshold would be treated as 'shadow funds' until verified. This aims to strengthen KYC-linked monitoring and disrupt fund layering mechanisms commonly used in fraud schemes.
- Customer-controlled safeguards: The RBI also proposes enabling customers to enable/disable specific payment channels, set transaction limits, and activate a 'kill switch' to block all digital transactions instantly.
The discussion paper recognises the importance of introducing strategic friction in a frictionless digital economy, marking a notable shift in policy from ensuring secure systems to addressing behavioural vulnerabilities. However, the proposals also raise critical implementation and policy questions, particularly around user convenience, system costs, and the potential dilution of the core principle of instant payments. The challenge for regulators will lie in calibrating these safeguards to ensure that security enhancements do not undermine the efficiency and accessibility that have driven India's success in digital payments.
Recent Developments In India's Corporate & Commercial Laws – April 2026
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