Page 59 - Banking Finance October 2025

RBI CIRCULAR

RBI

CIRCULAR

Reserve Bank of India (Authentication mecha- 2. Short title
nisms for digital payment transactions) Direc- These directions shall be called Reserve Bank of India
tions, 2025 (Authentication mechanisms for digital payment trans-
actions) Directions, 2025
September 25, 2025 3. Effective Date

1. Introduction All Payment System Providers and Payment System
All digital payment transactions in India are required Participants, including banks and non-bank entities,
to meet the norm of two factors of authentication. shall ensure compliance with these directions by April
While no specific factor was mandated for authentica- 01, 2026, unless indicated otherwise for any specific
tion, the digital payments ecosystem has primarily provision herein.
adopted SMS-based One Time Password (OTP) as the 4. Applicability
additional factor.
These directions shall be applicable to all Payment
As announced in Statement on Developmental and System Providers and Payment System Participants
Regulatory Policies dated February 08, 2024, in order (banks and non-banks).
to enable the payments ecosystem to leverage the These directions apply to all domestic digital payment
technological advancements for implementing alterna- transactions, unless specifically exempted otherwise.
tive authentication mechanisms, it has been decided
to publish Reserve Bank of India (Authentication 5. Definitions
mechanisms for digital payment transactions) Direc- I. Unless the context otherwise requires, the follow-
tions, 2025 (hereinafter referred to as “Directions”). ing terms shall bear the meanings assigned to
The directions provide the broad principles which shall them as below:
be complied with by all the participants in the pay- a. Authentication: Process of validating and
ment chain, while using a form of authentication. confirming the credentials of the customer
who is originating the payment instruction.
While these directions are applicable only to domes- b. Card Not Present (CNP) transaction: A trans-
tic transactions, in order to provide a similar level of action where the card and acceptance infra-
safety for online international transactions undertaken structure are not present in close proximity
using cards issued in India, the directions also incorpo- while making the transaction.
rate necessary instructions for specific cross-border
card transactions, in line with the Statement on De- c. Card Present transaction: A transaction that
velopmental and Regulatory Policies dated February is carried out through the physical use of card
07, 2025. at the point of transaction.
These directions are issued under Section 18 read with d. Cross-border CNP transaction: A payment
Section 10(2) of the Payment and Settlement Systems instruction wherein the card, issued by an In-
(PSS) Act, 2007 (Act 51 of 2007). dian issuer, is used for undertaking a payment

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