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RBI Mandates Two-Factor Authentication For Digital Payments From April 1, 2026

Komal Bajpai

Author

Updated: 09-01-2026 at 3:30 PM

As more and more digital payments are taking over the Indian economy, be it UPI transfers, card payments, or app-based wallets, security has repeatedly become a major concern. To address these risks and strengthen public confidence, the Reserve Bank of India regulation framework is introducing a major reform that will fundamentally change how online payments are authorised from April 1, 2026.

Under the new system, all domestic digital payment transactions must follow RBI two-factor authentication norms. This means transactions will no longer rely solely on passwords or SMS OTPs. Instead, payments must be verified using two independent authentication factors, significantly lowering the chances of unauthorised access, fraud, and identity theft.

This move forms a key part of the RBI digital payment security rules and reflects India’s transition towards globally aligned payment safety standards.

Also Read: Bank Locker Rules: Locker Charges, Insurance Policy and Regulation

What Is Two-Factor Authentication (2FA) And Why RBI Made It Mandatory?

Two-factor authentication (2FA) involves authentication by a user with two types of credentials: one that shows identity (such as a password or PIN) and one that shows possession (such as a device-bound token or biometric). This, when coupled with each other, makes digital transactions much more secure than single-factor methods.

Although India already uses two-step verification for many transactions, like UPI PINs combined with SMS OTPs, the RBI Authentication Mechanisms Directions, 2025, formally strengthen and standardise this approach across all domestic digital payments.

The regulator is also encouraging newer, safer alternatives, such as:

Biometric authentication.
App-based approval prompts.
Device-native authentication.
Token-based authorisation.

The key goals of this reform are:

The RBI introduced Mandatory 2FA for digital payments to achieve several long-term goals:

Increasing security levels to reduce fraud and cyberattacks.
Enabling technological upgrades in the payment ecosystem in India.
Promoting the use of more secure authentication options, not only SMS OTP.
Setting up strict responsibility of issuers and payment providers.
Developing trust among customers in online transactions.

Key Requirements Of The New 2FA Rules

These measures fall under broader payment security regulations India is adopting to safeguard consumers.

Aspect	New 2FA Requirement (From April 1, 2026)
Minimum Authentication Required	Two distinct factors for all digital payment transactions
Dynamic Factor Requirement	At least one factor must be dynamic and unique to each transaction
What Counts as an Authentication Factor	Something you know (PIN, password), something you have (device, token), something you are (biometrics)
Technology Options Beyond SMS OTPs	App-based prompts, biometric scans (fingerprint/face), software/hardware tokens
Exemptions	Very low-value contactless transactions, select offline small payments and recurring e-mandates as specified
Cross-Border Payments	Risk-based authentication for non-recurring international “card-not-present” transactions by October 1, 2026
Issuer Obligations	Banks and payment providers must upgrade systems, offer interoperable services, and may be liable for customer loss if non-compliant
Customer Choice	Providers can offer multiple 2FA options; users may select preferred methods where available.

This table is a summary of the key issues before April 2026. Dynamic factor requirement is particularly essential as it fights against fraudulent methods, such as in the replay attack and reuse of credentials.

What Are The Types of Authentication Factors That are Valid?

Under the RBI digital payment guidelines, authentication factors fall into three recognised categories:

Something you know: Passwords, PINs, passphrases
One of them: Device-linked tokens, hardware/software tokens.
One of the things you are: Biometric information like fingerprints or facial recognition.

In the case of online payments where the payment card is not in hand (ex, e-commerce), one or more factors must be dynamically generated (one per transaction). Examples include:

OTP or token that is transaction-specific.
App-based approval prompt
Only a biometric scan authenticated that transaction.

These methods are essential to implementing the RBI risk-based authentication framework effectively.

Also Read: RBI App - Benefits Of RBI's New Mobile Application

How Do These 2FA Rules Enhance Digital Payment Security?

India’s digital payment ecosystem has grown exponentially, but so have fraud techniques. SIM-swap fraud, phishing links, and malware attacks exploit weak authentication systems. The Reserve Bank of India regulation aims to address these vulnerabilities directly.

Less use of SMS OTPs that are prone to SIM swap and interception of messages.
Better and multi-layered security that is resistant to most fraud vectors.
Adaptability to future technology adoption, such as the use of biometrics and passkeys.
Increased customer protection and increased liability against fraud on banks and issuers.

As an illustration, SMS OTPs will remain valid, but cease to be the sole underlying aspect; issuers should offer alternatives like biometric or device-authenticated techniques, which would enhance flexibility to the user and improve security.

What Are The Exemptions And Special Provision Under The New Framework?

Although Mandatory 2FA for digital payments applies broadly, the RBI has introduced limited exemptions to maintain usability:

Contactless payments with values below some thresholds.
Offline online payments where the connectivity is low.
Routine e-mandates on low-risk and small frequent payments.
In some instances, FASTag (National Electronic Toll Collection) transactions.

For international card-not-present transactions, Digital payments compliance by April 1, 2026 will extend further, with full risk-based authentication required by October 1, 2026.

Issuer And Provider Responsibilities.

The new rules significantly expand the responsibilities of banks and payment providers. To comply with RBI digital payment security rules, issuers must:

Install interoperable tokenisation and authentication services between apps and platforms.
Implement risk-based authentication (e.g., high-value or suspicious transactions) support.
Ensure open access to provide all payment environments with authentication services.
Be liable to compensate customers in case of losses as a result of non-compliance when an authentication failure takes place.

These clauses fit in the greater goals of the regulator regarding consumer protection and technology neutrality in the Indian fintech environment.

Also Read: RBI's New Money Transfer Rules

Timeline And Implementation Deadline

The RBI has stipulated 1 April 2026 as the implementation date of two-factor authentication of domestic digital transactions. It is projected that Banks and payment system providers should have upgrades and compliance processes completed by this date.

The deadline regarding the use of cross-border payment authenticators using the card and risk-based non-recurring payment (CNP) authenticators is 1 October 2026.

Conclusion

The RBI’s decision to enforce RBI two-factor authentication marks a critical milestone in strengthening India’s digital payment infrastructure. By mandating stronger verification without compromising convenience, the regulator is future-proofing the system against evolving cyber threats.

To the citizens, this will imply Safer UPI, wallet and card payments, less risk of SIM swap and phishing attacks, More authentication options than SMS OTPs and a greater trust in the digital economy of India.

Overall, the mandate establishes a stronger infrastructure in which security and convenience are paired so that the users feel secure as the digital payment keeps overtaking the daily financial existence.

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