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RBI Extends Parallel Run for IVR Authentication, Seeks Input on MOTO Exemptions

Current · Source: Reserve Bank of India · RBI/2010-11/347 · issued 31 Dec 2010 · ~2 min read
Quick answerRBI allows a one-month parallel run for additional factor authentication on IVR transactions until Jan 31, 2011, after which non-compliant IVR transactions will be declined. Banks must also submit proposals on MOTO and recurring transactions by Feb 28, 2011.
The rule, in the simplest words
How it plays out — a real example

A branch operations officer in Indore is testing the new security system for phone payments. During the parallel run in January 2011, she lets customers complete their loan payments over the phone even if they forget the extra password, but she reminds them to use it next time. She also prepares a report for RBI by February 28, 2011, explaining how her bank will handle recurring utility payments and hotel bookings made by phone.

What changed

RBI has permitted a parallel run of the new additional authentication system for IVR transactions for one month up to January 31, 2011. During this period, IVR transactions will not be declined solely for lacking the additional factor. After January 31, 2011, all IVR transactions must comply with the additional factor authentication. Additionally, RBI has asked banks and card companies to revert by February 28, 2011 on the process for recurring transactions (utility standing instructions) and MOTO transactions (travel/hotel bookings).

What it means for you

Banks get a short window to test the new authentication system in live environment without penalizing customers for non-compliance on IVR. This reduces immediate operational risk but requires swift action to ensure full compliance by end-January 2011. The call for input on MOTO and recurring transactions indicates RBI is considering exemptions, but banks must prepare detailed proposals by February 28, 2011.

What you must do

Who it affects

All scheduled commercial banks including RRBs, Urban Co-operative Banks, State Co-operative Banks, District Central Co-operative Banks, Authorised card payment networks, Merchants handling IVR and MOTO transactions

❓ Common questions

What is the parallel run period for IVR transactions?

RBI has allowed a one-month parallel run from the date of the circular (December 31, 2010) until January 31, 2011. During this period, IVR transactions will not be declined solely for lacking additional factor authentication.

What happens after January 31, 2011 for IVR transactions?

After January 31, 2011, no IVR transactions will be permitted unless they comply with the additional factor authentication requirement.

Are MOTO transactions exempted from additional authentication?

Not yet. RBI has asked banks and card companies to revert by February 28, 2011 on the process for MOTO transactions and recurring utility payments. Exemptions are under consideration.

📜 Read the original circular — full text as issued by RBI
RBI/2010-11/347 DPSS.CO.No.1503/02.14.003/2010-2011 December 31, 2010 To The Chairman and Managing Director/ Chief Executive Officers All scheduled Commercial Banks including RRBs/Urban Co-operative Banks/ State Co-operative Banks/District Central Co-operative Authorised card payment networks Security Issues and Risk mitigation measures related to Card Not present transactions Please refer to our circular RBI/DPSS/No.1501/02.14.003/2008-2009 dated February 18, 2009 , wherein a directive was issued making it mandatory for banks to put in place additional authentication/validation based on information not visible on the cards for all on-line card not present (CNP) transactions except IVR transactions. This mandate was further extended to all CNP transactions including IVR transactions with effect from January 01, 2011 vide our circular RBI/2009-2010/420, DPSS No. 2303 / 02.14.003/2009-2010 dated April 23, 2010 . 2. The progress in implementing the directions has been under continuous monitoring since several stake holders are involved in implementing the service solutions. While considerable progress has been achieved in the matter, banks have been requesting to permit them to test the new system in a live scenario by providing a parallel run for a reasonable period, so as to ensure that customers are not put to inconvenience. 3. After further discussions with the stakeholders it has been decided to permit a parallel run of the new arrangement for a period of one month upto January 31, 2011. During this period IVR transactions will not be declined merely on account of non authentication of additional factor. However, all efforts will be taken by the banks to ensure that customers use the additional factor as well while transacting through the IVR mode. However, after January 31, 2011 no IVR transactions shall be permitted unless such transactions comply with the additional factor authentication requirement. 4. We have been receiving requests from the various stakeholders that the Mail order Telephone order (MOTO) transactions which are also a subset of the Card Not present transaction may be exempted from the purview of additional factor of authentication for the present.After extensive deliberations with the stakeholders, it has been decided that the banks and card companies shall revert to us by February 28, 2011 on the process to be followed in respect of:-: a. Recurring transactions based on standing instructions given to the merchants by the cardholders indicating the category of utility services. b. Travel and hotel industry bookings and other MOTO transactions 5. Please acknowledge receipt. Yours faithfully G. Padmanabhan Chief General Manager
Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2010-11/347 · issued 31 Dec 2010. The plain-English explanation above is BankPulse’s own independent summary.
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Who does what — compliance checklist
💻 IT / Systems
  • Ensure IVR systems are upgraded to support additional factor authentication by January 31, 2011.
📜 Compliance
  • Communicate with merchants and customers about the parallel run period and the mandatory compliance deadline.
  • Prepare and submit proposals to RBI by February 28, 2011 on handling recurring utility payments and MOTO transactions.
  • Monitor transaction declines during the parallel run to minimize customer inconvenience.
  • Coordinate with card networks to align on implementation timelines and testing.
Grouped from the action items above — a single circular may involve more than one team.
Worked example & action-note template

Example: if you are an IT/Systems lead at a bank this circular applies to (All scheduled commercial banks including RRBs, Urban Co-operative Banks, State Co-operative Banks, District Central Co-operative Banks, Authorised card payment networks, Merchants handling IVR and MOTO transactions), your first concrete step on “RBI Extends Parallel Run for IVR Authentication, Seeks Input on MOTO Exemptions” is: “Ensure IVR systems are upgraded to support additional factor authentication by January 31, 2011.” (RBI issued this 31 Dec 2010).

  1. Circular: RBI/2010-11/347 -- RBI Extends Parallel Run for IVR Authentication, Seeks Input on MOTO Exemptions
  2. Issued: 31 Dec 2010
  3. Action required: Ensure IVR systems are upgraded to support additional factor authentication by January 31, 2011.
  4. Action required: Communicate with merchants and customers about the parallel run period and the mandatory compliance deadline.
  5. Action required: Prepare and submit proposals to RBI by February 28, 2011 on handling recurring utility payments and MOTO transactions.
  6. Action required: Monitor transaction declines during the parallel run to minimize customer inconvenience.
  7. Action required: Coordinate with card networks to align on implementation timelines and testing.
  8. Owner: ____________ Target date: ____________
  9. Board/committee approval needed? Y / N
  10. Evidence filed in compliance register on: ____________
Built only from this circular’s own published fields — not legal advice; always confirm against the official RBI source.

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Official RBI source: https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=6185&Mode=0 — Plain-English summary by BankPulse (bankpulse.ai), reviewed by our expert reviewer, CA Amit Jain. Independent platform, not affiliated with the Reserve Bank of India; is our own plain-English paraphrase, not RBI’s original wording.
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