Say Goodbye to Just OTPs! RBI’s New Digital Payment Rules Are Here

New Digital Payment Rules: The Reserve Bank of India (RBI) has announced a major change in the rules for digital payments, which will come into effect from April 1, 2026. The main objective of these new rules is to make digital transactions more secure and user-friendly. Several significant changes are coming to the way we currently make online payments. Let’s find out in detail about these new rules and what benefits or changes they will bring for the general public.

Why was this new rule necessary?

In the age of Digital India, the use of online transactions is increasing rapidly. We transact crores of rupees every day through UPI, debit cards, credit cards, and various digital wallets. However, along with this, the risk of digital fraud is also increasing. To protect the hard-earned money of the common people and to strengthen the digital payment system, the Reserve Bank of India has issued these new guidelines, named ‘Authentication Mechanisms for Digital Payment Transactions Directions, 2025’.

What changes are coming?

The biggest change in the new rules is in the Two-Factor Authentication (2FA) system. Until now, for second-level authentication, we mostly had to rely on the SMS-based One-Time Password (OTP) that came to our mobile phones. But from now on, banks and other payment companies will be able to offer multiple alternative systems for customers.

• Multiple Authentication Options: From now on, besides SMS OTP, various options like passwords, passphrases, PINs, hardware or software tokens, and biometrics (such as fingerprints, Face ID) can be used. This will allow customers to choose the authentication method according to their convenience.
• Dynamic Factor Mandatory: For every transaction, at least one authentication factor must be dynamic, meaning a new and unique code or authentication will be generated for each transaction. This will make the security of the transaction even stronger.
• Risk-Based Verification: Banks and payment companies will now be able to implement additional verification by assessing the risk of the transaction. For example, if a transaction seems suspicious based on the customer’s location, transaction type, amount, and user’s transaction history, an additional layer of security verification may be applied.
• Customer Protection: The new rules give the highest priority to customer protection. If any bank or payment company fails to comply with these new rules and a customer suffers a financial loss as a result, that company will have to provide full compensation.
• New Rules for International Transactions: From October 1, 2026, a special verification system will also be introduced for international Card-Not-Present (CNP) transactions, which will provide additional protection for Indian card users abroad.

What will be the impact on the general public?

These new regulations will make digital transactions more secure for the general public. With multiple authentication options, users can choose the security measure they prefer. For example, in areas with network problems, one can use biometrics or another option instead of waiting for an SMS OTP. Although it may take some time to adapt to these new methods initially, in the long run, it will help reduce the amount of digital fraud and increase people’s trust.

This step by the Reserve Bank of India is an important milestone for the future of Digital India. It will not only secure digital transactions but also pave the way for new technologies and innovations in the coming days.