Page 9 - Banking Finance August 2025

RBI CORNER

RBI Tightens AePS Opera-

tor Due Diligence; Bans
Loan Prepayment Fines
for Small Borrowers
The Reserve Bank of India (RBI) has is-
sued final guidelines for onboarding
Aadhaar Enabled Payment System Ò»©­
(AePS) touchpoint operators, mandat-
ing strict due diligence by acquiring
banks from January 1, 2026. Operators
(ATOs) must undergo Know Your Cus-
tomer (KYC) checks before activation.
ATOs inactive for three months will re-
quire KYC revalidation before resuming Centre Asks Banks to Shut Inactive Jan-Dhan Ac-
services. If ATOs were already verified
as Business Correspondents, their due counts Amid Fraud Concerns
diligence may be adopted. The government has directed public sector banks to close dormant accounts
Acquiring banks must continuously under the Pradhan Mantri Jan-Dhan Yojana (PMJDY), following growing con-
monitor ATO transactions and apply cerns over their misuse as mule accounts in fraudulent transactions. Sources
operational risk-based parameters. familiar with the matter said that unused accounts are at risk of being ex-
These guidelines aim to reduce fraud ploited for routing or laundering illicit funds.
by mandating controls over location, While banks are being urged to shut these accounts, they are also initiating
volume, and transaction types, and en- re-KYC procedures to give account holders a chance to reactivate them, if
suring technological integrations like needed. The move comes in the wake of alarming data from the Reserve
APIs are solely used for AePS functions. Bank of India (RBI), which recorded 13,516 cases of digital payment fraud
Separately, RBI has prohibited prepay- in FY25- the highest across the banking sector.
ment penalties on floating-rate per- Jan-Dhan accounts were initially introduced to promote financial inclusion
sonal and small business loans, includ- by enabling access to banking services for underserved populations. How-
ing those offered by NBFCs and coop- ever, inactivity in some of these accounts has now prompted regulatory
erative banks. This directive takes ef- attention, as authorities aim to plug loopholes and prevent their abuse in
fect from January 1, 2026, and will cyber and financial frauds.
improve borrower mobility. Addition-
ally, the government has asked banks RBI's "Pre-payment Charges on Loans where prepayment charges are per-
to close inactive Jan-Dhan accounts to Directions, 2025," will apply to all mitted-such as for fixed-rate loans-
curb their misuse in frauds. loans sanctioned or renewed on or af- they must be transparently disclosed in
ter January 1, 2026. The directive in- advance, proportionate to the prepaid
RBI Bars Prepayment cludes loans from commercial banks, amount, and not applied retrospec-
Charges on Floating Rate cooperative banks, NBFCs, and all-India tively.
financial institutions.
Loans for Small Borrowers The RBI's move is intended to encour-
For small finance and regional rural age borrower mobility, enhance com-
In a borrower-friendly move, the Re-
banks, the waiver is applicable to loans petition among lenders, and simplify
serve Bank of India (RBI) has prohibited
prepayment penalties on floating-rate up to Rs. 50 lakh. Notably, even loans loan repayment for small borrowers.
personal loans and business loans of- that begin as fixed-rate but later con- RBI Imposes Penalties on
fered to individuals, micro, and small vert to floating-rate are eligible, if pre-
enterprises. The new rule, part of the paid during the floating phase. In cases HDFC Bank and Shriram

8 | 2025 | AUGUST | BANKING FINANCE