India Cracks Down on ‘Alarming’ Digital Payments Fraud With Strict New Rules

The Reserve Bank of India (RBI) has issued sweeping new rules to tighten authentication standards for digital payments, in a bid to curb rising fraud in the ￰3￱ guidelines, released on September 25, 2025, under the Authentication Mechanisms for Digital Payment Transactions Directions, 2025, mandate stronger security protocols across all domestic digital ￰4￱ Mandates Dynamic Authentication for All Digital Payments by April 2026 All payment system providers, including banks and non-bank entities, are required to comply with the rules by April 1, ￰5￱ measures build on the long-standing two-factor authentication norm but go further by requiring at least one dynamic factor of authentication for all digital transactions, excluding card-present ￰6￱ Reserve Bank of India ( @RBI ) releases new guidelines on authentication for #digital payment transactions, set to take effect from April 1, ￰7￱ framework mandates two-factor authentication for all digital payments, though no specific method is ￰8￱ central… ￰9￱ — All India Radio News (@airnewsalerts) September 25, 2025 This means that credentials such as SMS-based one-time passwords (OTPs), biometric data, or hardware tokens must be unique to each transaction, preventing reuse or ￰10￱ RBI said the framework is designed to help the payments ecosystem adapt to new technologies while maintaining consumer protection and market ￰11￱ directions also extend safeguards to cross-border transactions using cards issued in ￰12￱ October 1, 2026, card issuers will be required to validate non-recurring cross-border “card-not-present” transactions and introduce risk-based checks for all such payments, in line with anti-fraud ￰13￱ will bear direct responsibility for ensuring the robustness of authentication ￰14￱ cases where losses occur due to non-compliance, issuers must fully compensate affected ￰15￱ RBI also instructed that all authentication mechanisms must adhere to the provisions of the Digital Personal Data Protection Act, ￰16￱ framework emphasizes interoperability, requiring system providers to ensure that tokenization and authentication services are accessible across devices, applications, and storage ￰17￱ open-access approach is expected to standardize security across the fast-expanding payments ￰18￱ addition, the RBI has encouraged issuers to adopt a risk-based approach to ￰19￱ may be assessed against behavioral and contextual parameters such as user location, device attributes, and historical spending patterns.

High-risk transactions could face additional layers of verification, with DigiLocker proposed as a platform for customer notification and ￰20￱ the new directions primarily cover domestic payments, they also establish a timeline for cross-border compliance, requiring issuers to register their Bank Identification Numbers (BINs) with global card networks by October ￰21￱ RBI described the rules as a milestone in its effort to address growing risks in digital transactions, noting that fraud and unauthorized access have become a major concern as digital payment adoption continues to surge in ￰22￱ digital transactions now accounting for the majority of retail payments in the country, the central bank’s latest crackdown shows the increasing priority regulators are placing on securing the financial system against cyber ￰23￱ Tops Global Crypto Adoption Index but Faces Rising Fraud Cases India now leads the world in cryptocurrency adoption, topping the 2025 Chainalysis Global Crypto Adoption Index across all four ￰24￱ Chainalysis 2025 Global Crypto Adoption Index is out: India ranks #1, the United States #2 #Crypto #Global ￰0￱ — ￰25￱ (@cryptonews) September 3, 2025 Yet the surge in grassroots use and financial integration has been accompanied by a wave of fraud cases and enforcement ￰26￱ August 6, the Enforcement Directorate (ED) raided 11 locations in Delhi and other cities in connection with a $29 million Bitcoin ￰27￱ say scammers posed as police, government agents, and even tech support staff from Microsoft and Amazon to extort money from victims at home and ￰28￱ funds were allegedly laundered through USDT and hawala networks in the ￰29￱ raids came just a day after the ED began probing a $4.7 million scam involving a spoofed Coinbase website.

India’s crypto-related crime has also reached the ￰30￱ August 31, an anti-corruption court sentenced 14 men , including 11 current and former police officers and one ex-legislator, to life in prison over the 2018 abduction of businessman Shailesh ￰31￱ Indian anti-corruption court has sentenced 14 men to life in prison for the 2018 kidnapping and extortion of a businessman. #India #Crypto ￰1￱ — ￰32￱ (@cryptonews) August 31, 2025 The group forced him to transfer Bitcoin and cash, with prosecutors calling it one of the most high-profile crypto extortion cases in the ￰33￱ adoption, regulatory caution remains. A government document dated September 10 indicated India will not pursue a comprehensive crypto law but will maintain partial oversight through taxation and ￰34￱ stalls full crypto framework due to systemic risk ￰35￱ plan to maintain partial oversight with strict taxation rules. #Crypto #India #RBI ￰2￱ — ￰36￱ (@cryptonews) September 10, 2025 Authorities noted risks tied to speculative trading and stablecoins, warning their growth could disrupt India’s payments system.

India’s approach has dampened exchange volumes through a 30% tax on gains and a 1% levy on transactions, though global platforms continue to operate under Financial Intelligence Unit ￰37￱ estimate Indians hold around $4.5 billion in digital assets, showing the paradox: world-leading adoption alongside systemic skepticism and recurring fraud.