RBI Rule: New system for online money transfers to be implemented from April 1, 2025; here's all you need to know

RBI Rule: The Reserve Bank of India (RBI) has announced a new initiative aimed at addressing irregularities in online money transfers. From April 1, 2025, a new system will be implemented that allows customers to verify the name of the bank account before transferring money via the Real-Time Gross Settlement (RTGS) and National Electronic Fund Transfer (NEFT) systems. This move is expected to reduce errors and prevent fraudulent transactions, according to RBI circular.

Key Details About the New System

To enhance security in online money transfers, the RBI has instructed the National Payments Corporation of India (NPCI) to develop a verification facility. This facility will allow users to confirm the beneficiary’s account name before initiating a transfer using either RTGS or NEFT.

Currently, such a verification option is available for payments made through the Unified Payments Interface (UPI) and Immediate Payment Service (IMPS). The new RBI rule will extend this feature to RTGS and NEFT transactions, giving users an extra layer of security.

RBI’s Mandate for Banks

In a circular issued on Monday, the RBI outlined that all banks participating in the RTGS and NEFT systems must provide this verification service by April 1, 2025. This will be accessible via internet banking, mobile banking, and even for customers visiting bank branches to complete transactions.

The facility is designed to verify the name of the beneficiary’s bank account before the sender proceeds with the money transfer. It will help reduce errors and safeguard against fraud for customers using these payment methods.

Benefits of the New Facility

This new system will allow the sender to cross-check the name of the beneficiary’s bank account before initiating the transaction. The name will be retrieved from the beneficiary bank’s Core Banking Solution (CBS) based on the account number and IFSC code provided by the sender. 

If the beneficiary's name is successfully retrieved, it will be displayed to the sender. In cases where the name cannot be retrieved, the sender will have the option to proceed with the transaction at their own discretion, said the circular.

Focus on Reducing Fraud

The primary goal of this initiative is to minimise irregularities and fraudulent activities associated with RTGS and NEFT transactions. By ensuring that the sender can verify the beneficiary’s account name in advance, the RBI hopes to prevent cases of mistaken or fraudulent transfers.

No Charges for the New Facility

RBI has emphasised that customers will not be charged any fees for using the beneficiary account name verification service. The facility will be free for all users, and any disputes arising will be resolved between the remitting bank and the beneficiary bank. Both institutions will refer to the lookup reference number and respective logs to settle any issues, said RBI.

With the input of PTI