AEPS Update 2026: OTP Required for Cash Withdrawals Above ₹5,000

Quick Answer

Starting August 4, 2026, eligible AEPS cash withdrawals exceeding ₹5,000 will require an additional OTP verification step. To complete these transactions successfully, customers should ensure that the mobile number linked to their Aadhaar-enabled bank account is active and able to receive OTPs. The new security measure is designed to reduce fraud and strengthen the safety of Aadhaar Enabled Payment System (AEPS) transactions. Retailers and Banking Correspondents (BCs) should ensure customers are informed about this change before initiating eligible transactions.

Introduction

The Aadhaar Enabled Payment System (AEPS) has become one of India's most widely used banking services, especially in rural and semi-urban areas. Every day, millions of customers use AEPS to withdraw cash, check account balances, and access basic banking services through Banking Correspondents (BCs) and Micro ATMs.

As AEPS adoption has grown, so has the need for stronger security. To improve customer protection and reduce the risk of unauthorized withdrawals, a new verification process has been introduced for certain AEPS transactions.

Under the latest update, eligible cash withdrawal transactions above ₹5,000 will require OTP verification in addition to the existing authentication process. This additional step is intended to ensure that the transaction is being performed by the genuine account holder and to strengthen the overall security of the AEPS ecosystem. AEPS supports both biometric and OTP-based authentication mechanisms within its operating framework.

Whether you're a customer using AEPS for cash withdrawals, a retailer providing banking services, or a Banking Correspondent (BC), knowing how this updated verification process works will help you complete eligible transactions smoothly and minimize unnecessary interruptions.

In this guide, you'll learn:

• What the new AEPS OTP rule means
• Who needs OTP verification
• How the new verification process works
• What customers should do before visiting an AEPS retailer
• How retailers can prepare for the new requirement
• Frequently asked questions about the latest AEPS update
  
  

What Is the New AEPS OTP Verification Rule?

To strengthen transaction security, eligible AEPS cash withdrawals above ₹5,000 will now go through an additional OTP verification process before the transaction is approved.

Previously, most AEPS cash withdrawals relied primarily on Aadhaar authentication using biometric verification. Under the updated process, customers may also be required to verify a One-Time Password (OTP) sent to the mobile number linked with their Aadhaar-enabled bank account for eligible transactions above the specified amount.

The objective of this additional verification is to:

• Improve transaction security.
• Reduce the risk of unauthorized cash withdrawals.
• Protect customers from identity misuse and fraud.
• Strengthen trust in AEPS banking services.

This update adds another layer of protection while allowing customers to continue using AEPS conveniently through authorized Banking Correspondents and Micro ATMs.

Who Will Be Affected by This New AEPS Rule?

The new OTP verification requirement applies to eligible AEPS cash withdrawal transactions above ₹5,000. Customers, Banking Correspondents (BCs), and AEPS retailers should understand how this change may affect their transactions.

Customers

If you're withdrawing more than ₹5,000 through an eligible AEPS transaction, you may be required to verify an OTP sent to the mobile number linked with your Aadhaar-enabled bank account.

To avoid transaction issues, customers should:

• Keep their Aadhaar-linked mobile number active.
• Ensure their mobile network is available to receive OTPs.
• Never share the OTP with anyone except during the genuine transaction process.
• Verify transaction details before confirming the OTP.
  
  

AEPS Retailers & Banking Correspondents (BCs)

Retailers and BCs play an important role in helping customers understand the new verification process.

They should:

• Inform customers about the OTP requirement before starting eligible transactions.
• Confirm that the customer's registered mobile number is active.
• Guide customers through the verification process without asking for or storing the OTP.
• Ensure Micro ATM devices and AEPS software are updated as per the latest implementation requirements.

Providing clear guidance can reduce failed transactions and improve the customer experience.

How Does the New OTP Verification Process Work?

The updated process adds an extra verification step for eligible cash withdrawal transactions above ₹5,000.

Step 1: The customer visits an authorized AEPS retailer or Banking Correspondent.

Step 2: The retailer enters the transaction details and initiates the cash withdrawal request.

Step 3: The customer completes the required Aadhaar authentication process.

Step 4: For eligible transactions above ₹5,000, an OTP is sent to the customer's Aadhaar-linked mobile number.

Step 5: The customer enters or confirms the OTP as required.

Step 6: After successful verification, the transaction is processed and cash is disbursed.

Why Has OTP Verification Been Introduced?

The additional OTP verification has been introduced to strengthen the security of AEPS transactions and help reduce unauthorized withdrawals.

Some of the key objectives include:

• Strengthening customer authentication.
• Reducing identity misuse and fraudulent transactions.
• Increasing customer confidence in AEPS services.
• Adding an additional layer of security for higher-value eligible cash withdrawals.

AEPS already supports multiple authentication methods within its operating framework, and this enhancement further improves transaction security.

What Should Customers Do Before Visiting an AEPS Retailer?

To ensure a smooth transaction, customers should:

• Keep the mobile number linked with Aadhaar active.
• Carry the Aadhaar number or required identification as applicable.
• Ensure the phone has network coverage to receive OTPs.
• Never disclose the OTP to anyone outside the genuine transaction process.
• Verify the withdrawal amount before authorizing the transaction.

These simple steps can help avoid delays and improve transaction security.

What Should Retailers Do?

AEPS retailers should prepare for the updated process by:

• Educating customers about the new OTP requirement.
• Keeping AEPS software and Micro ATM devices updated.
• Following the latest NPCI and partner bank implementation guidelines.
• Never requesting customers to share OTPs for any purpose other than completing the authorized transaction.
• Assisting customers respectfully while maintaining the confidentiality of their banking information.

Following these best practices will help retailers provide secure and efficient AEPS services while minimizing transaction failures.

Benefits of the New AEPS OTP Verification Rule

Requiring OTP verification for eligible AEPS cash withdrawals above ₹5,000 adds another level of security, helping customers complete higher-value transactions with greater confidence. While customers will need to complete one additional verification step, the update offers several long-term benefits for both customers and AEPS retailers.

1. Enhanced Transaction Security

OTP verification adds an extra layer of authentication, making it more difficult for unauthorized individuals to complete eligible cash withdrawal transactions.

2. Better Protection Against Fraud

The additional verification helps reduce the risk of fraudulent withdrawals caused by identity misuse or unauthorized access to customer accounts.

3. Improved Customer Confidence

Knowing that higher-value transactions require an additional verification step can increase customer trust in AEPS services and encourage safer digital banking practices.

4. Safer Banking Experience

Customers receive greater control over their transactions, as eligible withdrawals above ₹5,000 require confirmation through an OTP linked to their registered mobile number.

5. Stronger Digital Banking Ecosystem

Enhanced security measures help strengthen the overall AEPS ecosystem by promoting safer and more reliable financial transactions.

Common Reasons Why OTP Verification May Fail

In some situations, customers may experience issues while completing OTP verification. Understanding the possible reasons can help avoid unnecessary transaction failures.

Inactive Aadhaar-Linked Mobile Number

If the mobile number linked with the Aadhaar-enabled bank account is inactive or no longer in use, the customer may not receive the OTP.

Poor Mobile Network

Weak network coverage may delay or prevent OTP delivery.

Incorrect Mobile Number

If the bank's records contain an outdated or incorrect mobile number, OTP verification cannot be completed successfully.

OTP Expired

One-Time Passwords remain valid only for a limited period. Entering an expired OTP may result in verification failure.

Temporary Technical Issues

Occasionally, temporary network or server issues may delay OTP generation or transaction processing.

Important Safety Tips for Customers

Customers should always follow safe banking practices while using AEPS services.

* Never share your OTP with anyone except during the genuine transaction process.

* Verify the withdrawal amount before confirming the transaction.

* Use only authorized AEPS Retailers or Banking Correspondents.

* Ensure your Aadhaar-linked mobile number remains active.

* Keep your mobile number updated with your bank whenever it changes.

* Report any suspicious transaction immediately to your bank.

Important Tips for AEPS Retailers

Retailers can ensure smooth customer service by following a few best practices.

* Inform customers about the OTP requirement before initiating eligible transactions.

* Never ask customers to disclose their OTP unnecessarily.

* Keep Micro ATM devices and AEPS applications updated.

* Follow the latest operational guidelines issued by your service provider.

* Assist customers while maintaining complete confidentiality of their banking information.

* Educate customers about safe digital banking practices.

Frequently Asked Questions (FAQs)

1. What is the new AEPS OTP verification rule?

Eligible AEPS cash withdrawal transactions above ₹5,000 now require OTP verification in addition to the applicable authentication process.

2. From when is the new rule applicable?

The update is effective from August 4, 2026, as communicated through the relevant implementation guidance for participating entities.

3. Does every AEPS transaction require OTP verification?

No. The OTP requirement applies to **eligible cash withdrawal transactions above ₹5,000**.

4. What happens if I don't receive the OTP?

Check your mobile network, confirm that your Aadhaar-linked mobile number is active, and contact your bank or the retailer if the issue continues.

5. Can I complete the transaction without OTP?

If OTP verification is required for an eligible transaction, the transaction cannot be completed without successful verification.

6. Should I share my OTP with the retailer?

No. Your OTP is confidential. It should only be used to authorize your own transaction and should never be shared outside the legitimate verification process.

7. What should retailers do before starting the transaction?

Retailers should inform customers about the OTP requirement and confirm that the customer can receive the OTP on their registered mobile number.

8. Why has NPCI introduced this update?

The objective is to strengthen transaction security, reduce unauthorized withdrawals, and improve customer protection within the AEPS ecosystem.

Conclusion

The introduction of OTP verification for eligible AEPS cash withdrawal transactions above ₹5,000 marks an important step toward strengthening the security of Aadhaar Enabled Payment System (AEPS) services. By adding an extra verification layer, the update helps reduce the risk of unauthorized transactions while improving customer confidence in digital banking.

For customers, keeping the Aadhaar-linked mobile number active and following safe banking practices will help ensure smooth transactions. For AEPS retailers and Banking Correspondents, creating awareness about the new process and assisting customers responsibly will be essential for a seamless transition.

As digital banking continues to evolve, security enhancements like OTP verification play a vital role in making financial services safer, more reliable, and better protected for everyone.