RBI’s New Digital Payment Authentication Rules: Risk-Based Checks Beyond 2FA Explained

The Reserve Bank of India has released a fresh set of directions that define how digital payments in India are verified. RBI released a circular on 25 September 2025, Titled the Authentication Mechanisms for Digital Payment Transactions Directions, 2025. These rules will come into force on April 1, 2026, giving banks, card issuers, and payment firms the opportunity to rebuild their security frameworks.

The new framework applies across the payment ecosystem. This includes all banks, card networks, fintech platforms, payment gateways, and wallet operators. It marks a step toward more secure digital commerce without making the process slower or more complicated for the end user.

Why Did RBI Introduce Rules Beyond Traditional 2FA?

The motivation behind the new rules is simple. Cyber fraud has become smarter than the old defences. RBI data shows a consistent rise in phishing, SIM-swap, and device-spoofing cases, many of which bypass SMS-based OTPs. 

At the same time, India’s payment infrastructure has matured. The rapid adoption of biometrics, device-binding technology, and tokenisation now allows for authentication systems that can learn from user behaviour instead of treating every transaction the same.

RBI’s 2025 directions aim to align India's financial sectors with evolving global practices, ensuring safety without sacrificing convenience.

What Does “Risk-Based Authentication” Mean in Digital Payments?

Risk-based authentication means that not every transaction needs the same level of security. The system learns from context—who you are, how much you are spending, where you are logging in from, and what device you are using. 

If you are making a small payment from a familiar device, the system may let it through with minimal verification. But if an unusual transaction appears, it may prompt for risk-based authentication. 

The result is a balance that India’s payment users have long needed. High security for high-risk actions and frictionless ease for everyday payments.

What are the Key Highlights of RBI’s 2025 Authentication Framework?

The new framework builds on existing 2FA but introduces flexibility and accountability. While 2FA remains the minimum, RBI encourages issuers to add more layers of protection for riskier transactions. In other words, the regulator is shifting from a rule-based to a risk-based model.

• Banks and payment companies can now choose from multiple authentication methods.
• Entities may also use contextual data such as device reputation, IP geolocation, or transaction history to decide if extra verification is needed.
• Cross-border and card-not-present (CNP) transactions require an Additional Factor of Authentication (AFA) when they appear unusual or are initiated on overseas websites.
• The framework also enforces interoperability across digital payment platforms and sets new norms for cross-border compliance. Card issuers must register Bank Identification Numbers (BINs) with card networks and validate all non-recurring international transactions by October 2026.
• Low-value transactions, recurring e-mandates, and certain offline digital payments remain eligible for simplified authentication to ensure user convenience.

The directions also make accountability straightforward. Banks and card issuers will bear the liability for any loss arising from weak authentication or non-compliance.

When Will the New RBI Authentication Rules Take Effect?

The new authentication framework officially takes effect on April 1, 2026. RBI deliberately provided a long runway to give banks, card networks, and payment intermediaries enough time to test and certify their systems.

The regulator has also outlined a transition roadmap through 2025, under which entities must:

• Develop or acquire risk-based authentication engines
• Run controlled pilots and report anomalies to RBI
• Educate customers about upcoming changes to verification flows
• Submit compliance readiness certificates before the final rollout

During this preparatory phase, RBI plans to coordinate with the National Payments Corporation of India (NPCI) and leading card networks to ensure interoperability across platforms. By April 2026, every digital payment made in India will have to pass through a dynamic, data-driven security filter.