India’s Strategic Measures to Combat Online Payment Frauds
India is intensifying its efforts to curb online payment fraud by implementing stricter regulations and enhanced security protocols. This initiative comes in response to a significant increase in the number of fraudulent cases and financial losses documented in the previous year.
Swift Action by RBI and NPCI
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The Reserve Bank of India (RBI) and the National Payments Corporation of India (NPCI) have introduced several key changes within the banking and payments ecosystem. Recent statistics reveal that fraud incidents associated with the Unified Payments Interface (UPI) surged from approximately 725,000 to 1.34 million in the fiscal year 2023-24. Correspondingly, financial losses escalated from ₹573 crore to a staggering ₹1,087 crore during the same period. To mitigate these risks, the RBI has sanctioned additional risk-based verification protocols for specific transactions, while NPCI has mandated banks and payment applications to block pull or collect requests on UPI starting October 1, 2025, effectively closing a prevalent avenue for scams.
Enhanced Authentication and Domain Regulations
Among the prominent reforms is the introduction of mandatory two-factor authentication for digital transactions, effective April 1, 2026. Banks and payment providers are now required to implement dual identification methods — such as biometrics, device tokens, or passphrases — although SMS OTPs will remain permissible in certain scenarios. Furthermore, the financial sector will be instructed to utilize distinct and reliable web domains, such as “bank.in” for banking institutions and “fin.in” for non-banking financial entities, simplifying the identification and blocking of phishing websites.
Impact on Users and Financial Institutions
The newly established rules aim to thwart impersonation scams, deceptive calls from individuals claiming to be law enforcement, and other social engineering tactics designed to siphon funds. A dedicated Cyber Fraud Mitigation Centre, in conjunction with the Indian Cyber Crime Coordination Centre, will spearhead response efforts. Additionally, a suspect registry derived from the national cybercrime portal will be employed to monitor dubious accounts and identities. Financial institutions and smaller operators offering Aadhaar-enabled payment services will be subject to more rigorous due diligence for their agents and terminals.
Challenges: Costs, Complexity, and Rural Connectivity
Financial institutions and technology providers will need to upgrade their systems to incorporate enhanced checks and maintain comprehensive records, which will incur additional expenses and complexity. This is particularly challenging for smaller firms and rural operators dependent on legacy devices. Consumers may encounter additional steps during payment processes, especially for cross-border or atypical transactions. It’s crucial to note that fraudsters often adapt their strategies following regulatory changes, necessitating continuous scrutiny and proactive enforcement to maintain efficacy.
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