The Reserve Bank of India is considering a one-hour hold on digital payments exceeding ₹10,000 to curb rising fraud. While aimed at reducing financial losses, the proposal faces debate over how it might impact transaction speed and the experience of small businesses.
The Reserve Bank of India (RBI) has released a discussion paper outlining potential new security measures to protect the digital payments ecosystem. As digital transactions continue to grow rapidly across the country, the central bank is looking to introduce what it calls positive frictions—small, intentional delays or extra steps designed to give users a chance to pause and verify a transaction before it is finalized.
Proposed Transaction Delays
A primary proposal in the paper involves a mandatory one-hour delay for Authorized Push Payment (APP) transactions that exceed ₹10,000. The RBI notes that these high-value transactions account for approximately 98.5% of the total value of reported fraud. By introducing a cooling-off period, the regulator aims to provide a window for victims to stop fraudulent transfers before the funds are fully settled in the recipient's account. However, this approach has drawn attention from industry observers who point out that smaller transactions, while individually less expensive, make up a majority of reported fraud cases. There is ongoing discussion about whether a fixed threshold will effectively protect individuals for whom smaller losses are still financially significant.
Authentication and Infrastructure Challenges
Another significant proposal focuses on protecting vulnerable user segments, including individuals over the age of 70 and those with disabilities. The RBI is exploring an additional authentication step, such as approval from a trusted contact, for transactions exceeding ₹50,000. While the objective is to add a safety layer, banks and payment providers are evaluating the technical complexities of identifying these users and the potential for increased friction in day-to-day banking. Additionally, the proposal includes measures to restrict large aggregate credits in accounts suspected of being used as mule accounts—accounts used to transfer illegally obtained money. Defining the operational responsibility between traditional banks and Third-Party Application Providers (TPAPs) will be essential for the smooth implementation of these safeguards.
Market and Operational Considerations
The Indian digital payment sector has thrived due to the speed and convenience of immediate transfers. Introducing new layers of security involves a careful balance between safety and user experience. Experts have pointed out that implementing features like a transaction kill switch or customer-defined limits will require significant upgrades to current payment infrastructure. For investors and market participants, the focus will be on the final guidelines issued by the RBI. The next steps will likely involve further consultations with stakeholders to refine these proposals, ensuring that the new security measures do not disproportionately affect the liquidity needs of small businesses or the efficiency of the overall digital payment rails.