By Vikrant Rana and Rima Majumdar
During the hearing in the DNR Batch Matters, it was brought to the attention of the Court that in several cases, there was discrepancy between the name of the bank account holder and the name mentioned in the billing details. In view of this submission, the Court had impleaded Reserve Bank of India as Defendant in the case Gujarat Cooperative Milk Marketing Federation Ltd. v. Amul-Franchise.in[1]
In the above matter, HMJ Prathiba M. Singh of the Hon’ble Delhi High Court, the Court had raised a query to the RBI back in 2023, as to “whether RBI can issue guidelines making it mandatory for banks to match the beneficiary’s name/name in the billing details with the account holder’s name and not merely the account number, whenever banks accept online or offline payments”.[2]
In response to the said query, RBI submitted that the facility of beneficiary name lookup at the time of origination of transaction is available for UPI, and RBI is exploring the feasibility for introducing the same facility for RTGS/NEFT and other modes of payment. Accordingly, an Affidavit was filed by RBI in which the introduction of name look-up facility in respect of non-digital payments such as RTGS, IMPS, NEFT was eventually stated to be made available by June 2024. In view thereof, the involvement of RBI was no longer required, and as a result, RBI was deleted as a Defendant in the batch matters.
In furtherance of above submission, vide its recent notification dated December 30, 2024 the Reserve Bank of India (RBI) introduced the “beneficiary bank account name look-up facility” for NEFT and RTGS transactions, thereby allowing the remitter of funds to verify the name of a bank account’s beneficiary before initiating the transfer.[3] This move aims to enhance the accuracy of electronic fund transfer and reduce instances of fraud. Based on the account number and IFSC of the beneficiary entered by the remitter, this facility will fetch the beneficiary’s account name from the bank’s Core Banking Solution, thereby thwarting the efforts of those various “John Does/Ashok Kumars” from impersonating their personal bank accounts as the account of a well-known brand and defraud the public. (read here: https://ssrana.in/articles/delhi-high-court-tackles-online-counterfeits-india/ )
The age of internet and online transactions have brought with it a rise in scams and fraudulent activities, the most famous ones being fake franchise/dealership offers by imposters for well-known brands, offered through fraudulent websites. (read here: https://ssrana.in/articles/conundrum-of-fake-franchise-and-dealerships/ )
Currently, the Unified Payments Interface (UPI) and Immediate Payments Service (IMPS) payment systems allow a person initiating transfer to verify the beneficiary’s name prior to remitting money. Thus, before making a UPI payment, a remitter can check the fund receiver’s name on verifying the UPI ID or mobile number. In a similar vein, it has been decided to implement a facility that would enable remitters to verify the beneficiary’s bank account name before initiating transfer of funds via RTGS or NEFT transactions.
What the RBI Notification states:
This crisp notification provides the following:
- Banks that provide NEFT and RTGS systems shall make this facility available to their customers through internet/mobile banking. The facility will also be available to remitters visiting the bank branch for making such transactions.
- The National Payments Corporation of India (NPCI) will develop this facility and ensure its integration across all participating banks, who have to implement this facility no later than April 01, 2025.
Furthermore, to ensure uniform experience for customers, the following instructions have also been prepared for the banks to adhere to:
- This option to verify the beneficiary name will be available in internet/mobile banking facilities, at the time of registering a beneficiary and at the time of one-time fund transfer where the beneficiary may not be registered.
- An option to re-verify a beneficiary will also be available.
- If the beneficiary name cannot be displayed for any reason, the remitter can proceed with the transaction at their discretion.
- This service will be provided by all banks at no extra charge.
Author’s note and Conclusion
As a step towards prevention of bank fraud and financial scams, the RBI had announced the facility to verify the name of the beneficiary account holder before making funds transfer in its Statement on Developmental and Regulatory Policies dated October 09, 2024 and has now mandated the same through official notification. This initiative is part of RBI’s efforts to answer the Court’s query in HMJ Prathiba M. Singh of the Hon’ble Delhi High Court and strengthening the integrity of country’s payment systems. In case of any discrepancy, this facility will allow the remitters to immediately correct the account number, thereby enhancing the user experience by adding additional layer of verification and secured transaction.
Aashi Nema, Junior Associate Advocate at S.S. Rana & Co. has assisted in the research of this article.
[1] CS (COMM)- 350/2022
[2] Order dated February 10, 2023 passed in CS(COMM) 135/2022
[3] RBI/2024-25/99