Exclusive: RBI working towards speeding up fraud-related refunds, stricter fund transfer norms soon, say sources

The Reserve Bank of India (RBI) is considering a major overhaul of the country’s fraud-prevention and refund mechanism, with new norms aimed at ensuring that money lost to scams is either frozen or refunded at a faster pace, banking sources told Zee Business. The move comes amid growing online financial fraud and frustration among victims who either do not get their money back or receive refunds only after long delays.

According to banking officials, the RBI is preparing a framework that will introduce stricter rules for large-value transactions, aimed at protecting people duped of their hard-earned money.

RBI plans major digital banking overhaul with consent-based transfers

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A key proposal being considered, said the sources, is a new consent-based layer for fund transfers. Under this model, they added, users remitting money will be required to provide explicit consent allowing the recipient to use those funds within the next one hour.

RBI mulls stricter fund transfer rules: 24-hour lock, faster fraud refunds likely, say sources

In case no consent is given, the money sent will be ransferred but locked for 24 hours, a period during which the recipient will not be able to access the funds either digitally or through an ATM, said the sources.

This feature is set to enable the sender to discreetly enable fund utilisation for specific purposes. In many cases, fraudsters withdraw or reroute money instantly after a person falls prey to the scam. Such a system, according to the sources, will provide an extra layer of safety against fraudsters.

RBI considering instant fraud freeze model

The proposed rules are likely to be part of a larger push to reform refund timelines and strengthen protections. RBI Governor Sanjay Malhotra stated recently that the central bank was considering mechanisms to speed up refunds in fraud cases.

Earlier, the Supreme Court stressed the need for a more robust fraud-refund system in the domestic banking network.

The sources also said that the central bank is working on a model in which funds involved in suspected fraud will be immediately frozen, making tracking easier and preventing rapid movement across accounts.

If approved, the new framework could mark one of the most significant consumer-protection reforms in the country's digital banking ecosystem.

Here are answers to some frequently asked questions (FAQs) on the subject:

What kind of changes is the RBI considering for digital fund transfers? The RBI is learned to be working on a new framework that could introduce stricter norms for large digital transactions. It may also introduce mechanisms to freeze or quickly refund money lost to fraud. Why is the RBI planning these changes? Rising online financial fraud and delays in refunding victims have pushed the regulator to put in place faster, more secure systems to protect consumers. What is the new consent-based layer being proposed? Under the model being considered by the RBI, anyone transferring money may be required to provide explicit consent allowing the recipient to use the funds within the next one hour. If no consent is granted, the money will be transferred but locked for 24 hours. The recipient will not be able to access the funds during this period. How does this consent feature help prevent fraud? Since fraudsters often withdraw money instantly, the 24-hour lock gives both banks and customers enough time to detect suspicious activity and raise red flags.