The Reserve Financial institution of India is phasing out its long-standing reliance on SMS-based one-time passwords (OTP), shifting the nation’s complete digital funds trade to a broader, risk-based framework for two-factor authentication (2FA).
Beginning April 2026, all home digital funds—from UPI to on-line card transactions—have to be verified with no less than two elements. RBI has refused to dictate which of them, giving banks and cost companies the liberty to innovate. The one non-negotiable: for something exterior “card-present” transactions, one of many elements needs to be dynamic and distinctive for every cost.
India’s digital funds increase has leaned closely on text-message OTPs for the previous decade, creating what regulators now name an “OTP monoculture”. This made funds weak to SIM swaps, SMS outages, and an ecosystem of distributors extracting income from OTP visitors.
By not prescribing SMS, biometrics, or any single methodology, the RBI is pushing issuers towards extra versatile authentication, together with device-native biometrics, passkeys, and cryptographic tokens.
Issuers at the moment are allowed to layer in contextual checks resembling gadget ID, geolocation, person behaviour, and historic patterns. For top-risk transactions, the RBI suggests utilizing DigiLocker to push real-time confirmations. The central financial institution’s guess is that clients will face fewer clunky prompts when threat is low, whereas nonetheless having fun with stronger safety when it counts.
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“The lately launched instructions strike an necessary stability between client safety and innovation. We actually admire the regulator’s consideration of trade suggestions. The readability and adaptability supplied will allow issuers and cost gamers to embrace next-generation instruments like biometrics, tokenisation, and contextual threat checks,” stated Vishwas Patel, Chair, Funds Council of India & Jt. Managing Director, Infibeam Avenues, stated.
“By holding safety on the core, the RBI has paved the best way for a safer, easier, and extra inclusive digital funds expertise for each customers and companies,” he added.
The principles apply solely to home transactions. For cross-border card-not-present purchases, issuers have till October 2026 to roll out extra validation layers. Till then, the previous OTP-heavy framework might be used for worldwide spending.
“RBI by mandating risk-based checks in its newest instructions has formalised a framework that encourages a wide range of authentication mechanisms past simply SMS-based OTPs. The precise requirement for validating an extra issue of authentication in cross-border card-not-present transactions is a essential step to extend belief and cut back dangers, which is able to finally profit each companies and their clients,” stated Sanjay Tripathy, CEO & Co-Founder, BRISKPE, a cross-border funds platform.
“It offers a transparent, uniform customary that aligns with world finest practices and can strengthen India’s place within the worldwide digital funds panorama. The transfer will foster a extra strong and compliant ecosystem, guaranteeing smoother and safer cross-border transactions for all,” he added.
Edited by Swetha Kannan
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