RBI Considers One-Hour Delay for UPI Transactions Exceeding Rs 10,000
Introduction of Safeguards in Digital Transactions
Mumbai: The Reserve Bank of India (RBI) has issued a discussion paper outlining various options to enhance security measures for digital transactions. Among these options is a proposal to introduce a one-hour delay for processing authorised push payments above Rs 10,000, aimed at reducing the increasing incidence of fraud, which is projected to exceed Rs 22,930 crore in 2025.
The discussion paper presents four different strategies. Besides the proposed one-hour lag for higher-value transactions, other suggestions include additional authentication for senior citizens, a review requirement for accounts receiving large credits, and customer-controlled transaction settings.
Details on Proposed Measures
Under the first proposal, banks would be mandated to hold transfers exceeding Rs 10,000 for one hour at the sender’s account. This would allow customers the opportunity to cancel a transaction while it is pending. If the transaction is deemed suspicious, the bank would be required to reconfirm with the payer before completing the transfer. Notably, merchant payments, e-mandates, National Automated Clearing House (NACH) transactions, and cheque payments would not be subject to this delay. Furthermore, customers would have the option to whitelist certain payees to bypass the waiting period.
The RBI highlights that transactions over Rs 10,000 account for roughly 98.5 percent of total fraud values while constituting about 45 percent of reported fraud cases by number, highlighting the need for targeted security measures.
Understanding Digital Fraud
The paper emphasizes that most digital frauds do not occur through technical failures but rather involve criminals utilizing social engineering techniques, impersonation, and coercive tactics to access victims’ funds. This form of fraud is known as Authorised Push Payment (APP) fraud. Once money is transferred via fast payment systems such as UPI or IMPS, recovery can be challenging.
According to the RBI, fraudsters often create a sense of urgency and exert continuous pressure on victims to prevent them from taking time to think. The introduction of a lag in processing payments could disrupt this psychological control, making it harder for fraudsters to succeed.
Additional Recommendations for Enhanced Security
Other proposals outlined in the discussion paper include a recommendation for individuals aged 70 and older, as well as persons with disabilities, to designate a “trusted person” whose authentication would be necessary for transactions above Rs 50,000. This measure addresses a significant portion of reported fraud cases, which constitute around 92 percent of total fraud value.
Another suggestion would limit the total annual credits into individual and small business accounts to Rs 25 lakh, with any amounts exceeding this limit placed in “shadow credit.” Access to these funds would require the account holder to justify the transaction’s legitimacy within 30 days; otherwise, the amount would be returned to the sender.
Furthermore, a proposed “kill switch” feature would allow customers to disable all digital payment options from their account with a single action. This feature is already available in Singapore and is being implemented by some banks in Australia.
Feedback and Implementation Timeline
The RBI states that these options are designed to slow down certain categories of digital payments, providing opportunities for both customers and payment systems operators (PSOs) to prevent fraudulent transactions. The apex bank has acknowledged that implementing a mandatory lag could clash with the principle of instant payments, potentially leading to user confusion. It also noted the risk of fraudsters persuading victims to whitelist transactions, thus undermining the proposed protective measures.
Stakeholders are invited to submit their feedback on these proposals via the RBI’s Connect 2 Regulate portal by May 8. The central bank has indicated that it will consider releasing draft guidelines after assessing the responses received.
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Contents
Introduction of Safeguards in Digital TransactionsMumbai: The Reserve Bank of India (RBI) has issued a discussion paper outlining various options to enhance security measures for digital transactions. Among these options is a proposal to introduce a one-hour delay for processing authorised push payments above Rs 10,000, aimed at reducing the increasing incidence of fraud, which is projected to exceed Rs 22,930 crore in 2025.The discussion paper presents four different strategies. Besides the proposed one-hour lag for higher-value transactions, other suggestions include additional authentication for senior citizens, a review requirement for accounts receiving large credits, and customer-controlled transaction settings.Details on Proposed MeasuresUnder the first proposal, banks would be mandated to hold transfers exceeding Rs 10,000 for one hour at the sender’s account. This would allow customers the opportunity to cancel a transaction while it is pending. If the transaction is deemed suspicious, the bank would be required to reconfirm with the payer before completing the transfer. Notably, merchant payments, e-mandates, National Automated Clearing House (NACH) transactions, and cheque payments would not be subject to this delay. Furthermore, customers would have the option to whitelist certain payees to bypass the waiting period.The RBI highlights that transactions over Rs 10,000 account for roughly 98.5 percent of total fraud values while constituting about 45 percent of reported fraud cases by number, highlighting the need for targeted security measures.Understanding Digital FraudThe paper emphasizes that most digital frauds do not occur through technical failures but rather involve criminals utilizing social engineering techniques, impersonation, and coercive tactics to access victims’ funds. This form of fraud is known as Authorised Push Payment (APP) fraud. Once money is transferred via fast payment systems such as UPI or IMPS, recovery can be challenging.According to the RBI, fraudsters often create a sense of urgency and exert continuous pressure on victims to prevent them from taking time to think. The introduction of a lag in processing payments could disrupt this psychological control, making it harder for fraudsters to succeed.Additional Recommendations for Enhanced SecurityOther proposals outlined in the discussion paper include a recommendation for individuals aged 70 and older, as well as persons with disabilities, to designate a “trusted person” whose authentication would be necessary for transactions above Rs 50,000. This measure addresses a significant portion of reported fraud cases, which constitute around 92 percent of total fraud value.Another suggestion would limit the total annual credits into individual and small business accounts to Rs 25 lakh, with any amounts exceeding this limit placed in “shadow credit.” Access to these funds would require the account holder to justify the transaction’s legitimacy within 30 days; otherwise, the amount would be returned to the sender.Furthermore, a proposed “kill switch” feature would allow customers to disable all digital payment options from their account with a single action. This feature is already available in Singapore and is being implemented by some banks in Australia.Feedback and Implementation TimelineThe RBI states that these options are designed to slow down certain categories of digital payments, providing opportunities for both customers and payment systems operators (PSOs) to prevent fraudulent transactions. The apex bank has acknowledged that implementing a mandatory lag could clash with the principle of instant payments, potentially leading to user confusion. It also noted the risk of fraudsters persuading victims to whitelist transactions, thus undermining the proposed protective measures.Stakeholders are invited to submit their feedback on these proposals via the RBI’s Connect 2 Regulate portal by May 8. The central bank has indicated that it will consider releasing draft guidelines after assessing the responses received.
