India’s banking industry is backing the Reserve Bank of India’s (RBI) efforts to strengthen safeguards against digital payment fraud, but lenders say the proposed measures must strike a balance between customer protection and the fast-growing real-time payments ecosystem.
Bankers believe the central bank’s proposals—including a mandatory cooling-off period for certain high-value digital transfers and additional authentication for senior citizens—could reduce instances of authorised push payment (APP) fraud, where customers are manipulated into voluntarily transferring money to fraudsters. However, they caution that a blanket implementation could inconvenience genuine users and require costly changes to banking infrastructure.
In a discussion paper released in April, the RBI proposed that once an individual customer—including sole proprietors and partnership firms—initiates an authorised push payment exceeding ₹10,000, banks could introduce a one-hour lag before the transaction is settled. To simplify implementation, the central bank suggested that the delay be introduced only at the payer’s end.
“The list of transactions where there will be a lag has to be carefully designed. It cannot be universal,” a senior executive at a private sector bank told The Telegraph. “A customer purchasing a mobile phone worth more than ₹10,000 would certainly not want to wait for an hour for the payment to go through. However, in situations where a customer is being manipulated into transferring money to a fraudster, such a cooling-off period could prove extremely effective.”
Amid ongoing discussions, industry sources said that banks would have to make extensive changes to their payment systems to operationalise the proposal, including creating transaction queues, enabling cancellation mechanisms during the cooling-off window and modifying settlement processes.
“These are significant systemic changes that come with considerable costs,” the executive said.
The concerns come at a time when banks are already grappling with the economics of digital payments. Under the zero-Merchant Discount Rate (MDR) regime for Unified Payments Interface (UPI) transactions, banks are prohibited from charging merchants for processing payments. The Payments Council of India has previously estimated that maintaining and expanding the UPI ecosystem requires annual investments of nearly ₹10,000 crore, much of which is currently borne by banks and payment service providers.
The RBI has also proposed an additional layer of protection for vulnerable customers in the discussion paper. For senior citizens aged above 70 years and persons with disabilities, the central bank has suggested introducing a “trusted person” mechanism for high-value digital transactions, such as those exceeding ₹50,000. Under the proposal, a pre-designated trusted individual would be required to provide additional authentication before such payments are completed. Any change to the trusted person would be subject to a mandatory 24-hour cooling-off period to prevent fraudulent modifications.
While bankers welcomed the objective, they pointed to practical difficulties.
“There are operational challenges in implementing additional authentication through a trusted person,” another banker said. “Suppose a senior citizen is making a payment at a diagnostic centre or hospital and has nominated their son or daughter as the trusted person. If that individual is unavailable at that moment, the transaction could be delayed despite being genuine.”
Industry executives said such situations could become common unless adequate flexibility is built into the framework.
The RBI’s proposals draw upon global practices adopted in jurisdictions such as the UK, Singapore, Sweden, the US and Ireland, where regulators have introduced measures to counter APP frauds. However, bankers argue that India’s digital payments ecosystem is unique because of the scale and instant nature of transactions, making it necessary to tailor safeguards to domestic conditions.
The central bank has invited stakeholder comments on the discussion paper, following which it is expected to finalise the framework. Bankers remain optimistic that the RBI will incorporate industry feedback to ensure that stronger fraud protection does not come at the cost of customer convenience.