RBI Strengthens Digital Payments: Risk-Based Checks, AFA for International Card Use
New norms aim facilitate interoperability and open access to technology, which could lead to greater innovation and a more seamless experience.
The Reserve Bank of India or the RBI, is proposing new norms that will allow digital payment providers to implement additional risk-based checks beyond the mandatory two-factor authentication for certain transactions.
The new measures are designed to enhance security by applying extra scrutiny to transactions that have a high-risk perception, thereby reducing the potential for fraud.
The proposed norms are also intended to foster a more open and flexible digital payments ecosystem. They facilitate interoperability and open access to technology, which could lead to greater innovation and a more seamless experience for consumers and businesses alike.
Further, the new regulations will clearly define the responsibilities of card issuers. They will be mandated to validate the Additional Factor of Authentication or AFA in non-recurring, cross-border card-not-present or CNP transactions whenever a request is made by the overseas merchant or acquiring bank. This clarification aims to streamline the process for international payments and ensure a consistent level of security.
Further, the RBI's Monetary Policy Committee may adopt a dovish tilt at its meeting next week and deliver an interest rate cut to support the economy, according to Citi's Chief India Economist Samiran Chakraborty. The MPC is set to meet from Sept. 29 to Oct. 1.
Analysts took into account the US tariff shock on Indian exports, better-than-expected growth, fiscal stimulus, lower inflation resulting from GST rate cuts, and incomplete bond market channel transmission when assessing the appropriate monetary policy response, especially after the central bank paused its rate-easing cycle in August.
"We conclude that space for a more dovish tilt in the October MPC has opened up...," Chakraborty said in a note on Thursday.
Citi expects two prominent outcomes from the MPC meeting: an "insurance" repo rate cut to protect against the downside growth risks or a "dovish pause" with an outright assurance to act soon if required.
