The Reserve Bank on Wednesday said that in case of complaints of fraudulent electronic banking transactions through credit cards, the bank should provide shadow reversal or provisional credit of the disputed amount within 5 days from the date of customer notification.
RBI has issued revised framework on limiting customer liability in digital transactions.
The revised norms state that a bank should design its systems and processes to make customers feel safe in carrying out electronic banking transactions (EBT) and should put in place appropriate systems and processes to ensure the security of EBTs carried out by customers.
“Banks will mandatorily send instant SMS alerts to their customers for all EBTs worth more than ₹500. For EBTs worth up to ₹500, the bank may decide to send instant SMS as per its internal policy, but no charges will be levied on the customer,” the RBI said.
These norms will come into effect from January 1, 2027.
Also, the Bank’s communication system deployed to send alerts and receive responses will record the date and time of delivery of the message and receipt of the customer’s response, if any.
RBI said that upon receiving a complaint from a customer regarding any fraudulent EBT, the bank will take prompt steps to stop further unauthorized EBT in the customer’s account.
“In cases where fraudulent EBT occurs due to negligence/deficiency on the part of the bank, the customer will be entitled to zero liability and reversal of the transaction, irrespective of whether the customer has reported the transaction or not,” it said.
Additionally, a customer should be entitled to “zero liability and reversal of transactions” in cases of third party breach where the customer reports the unauthorized fraudulent EBT to the bank within five calendar days from the date of the incident, the RBI said.
In cases of third party violations reported to the Bank after five calendar days, the Customer’s liability will be determined as per the Bank’s policy.
In March, the central bank had proposed, through draft instructions, to expand the scope of existing instructions on limiting customers’ liability in unauthorized EBTs.
It also proposed to cover other categories of fraudulent EBTs, reduce the time taken by banks to process complaints related to fraudulent EBTs, and introduce a compensation mechanism for small value fraudulent transactions.
RBI said the feedback received on the draft instructions has been examined and the resulting amendments have been suitably incorporated in the final revised instructions.
In cases where the Bank is required to reverse a fraudulent EBT, it will ensure that the value of reversal is based on the original date of its occurrence and the Customer does not suffer loss of interest or incur any additional burden of interest/fees, as applicable.
Some stakeholders had suggested inclusion of a provision related to shadow reversal in case of fraudulent EBTs in credit cards, which was accepted by the RBI.
“In case of complaint arising out of fraudulent EBT on credit card, the bank will provide shadow reversal equal to the amount involved in the fraudulent EBT within five calendar days from the date of receipt of notification from the customer,” RBI said.
RBI has issued separate instructions for commercial banks, small finance banks, payments banks, local area banks and co-operative banks.
RBI further said that in cases where fraudulent EBT occurs due to negligence of the customer, he should be liable for the loss suffered and not be eligible for compensation to the extent of the loss.
It says, “Losses arising from any unauthorized transactions occurring after a customer reports fraudulent EBTs to the bank will be borne by the bank.”
On compensation for small value fraudulent EBTs, the RBI said a genuine victim who has filed a complaint of gross loss amounting up to ₹50,000 due to fraudulent EBTs should be compensated 85 per cent of the net loss amount or ₹25,000, whichever is lower, “once during his lifetime”.
For complaints related to fraudulent EBTs with loss amount less than ₹29,412, where 85 per cent compensation is given, 65 per cent should be borne by the Reserve Bank, 10 per cent by the customer’s bank and the remaining 10 per cent by the beneficiary bank in case of complaints arising from domestic fraud.