Reserve Bank News

RBI Tightens AePS Operator Due Diligence; Bans Loan Prepayment Fines for Small Borrowers

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The Reserve Bank of India (RBI) has issued final guidelines for onboarding Aadhaar Enabled Payment System (AePS) touchpoint operators, mandating strict due diligence by acquiring banks from January 1, 2026. Operators (ATOs) must undergo Know Your Customer (KYC) checks before activation. ATOs inactive for three months will require KYC revalidation before resuming services. If ATOs were already verified as Business Correspondents, their due diligence may be adopted.

Acquiring banks must continuously monitor ATO transactions and apply operational risk-based parameters. These guidelines aim to reduce fraud by mandating controls over location, volume, and transaction types, and ensuring technological integrations like APIs are solely used for AePS functions.

Separately, RBI has prohibited prepayment penalties on floating-rate personal and small business loans, including those offered by NBFCs and cooperative banks. This directive takes effect from January 1, 2026, and will improve borrower mobility. Additionally, the government has asked banks to close inactive Jan-Dhan accounts to curb their misuse in frauds.

Centre Asks Banks to Shut Inactive Jan-Dhan Accounts Amid Fraud Concerns

The government has directed public sector banks to close dormant accounts under the Pradhan Mantri Jan-Dhan Yojana (PMJDY), following growing concerns over their misuse as mule accounts in fraudulent transactions. Sources familiar with the matter said that unused accounts are at risk of being exploited for routing or laundering illicit funds.

While banks are being urged to shut these accounts, they are also initiating re-KYC procedures to give account holders a chance to reactivate them, if needed. The move comes in the wake of alarming data from the Reserve Bank of India (RBI), which recorded 13,516 cases of digital payment fraud in FY25- the highest across the banking sector.