The Reserve Bank of India (RBI) on Thursday said a customer will be entitled to zero liability when unauthorised transaction occurs as a result of contributory fraud, negligence or deficiency on the part of the bank irrespective of whether or not the transaction is reported by the customer.
In a notification to commercial banks, the RBI said there will be zero liability in the case of third-party breach where the deficiency lies neither with the bank nor with the customer but lies elsewhere in the system, and the customer notifies the bank within three working days of receiving the communication from the bank regarding the unauthorised transaction. For cases reported within four to seven days, the liability will be the transaction value or the amount stipulated for various accounts, whichever is lower and beyond seven working days, the liability will be as per bank’s board approved policy.
However, a customer will have limited liability for the loss in cases where the loss is due to negligence by a customer, such as where he has shared the payment credentials, the customer will bear the entire loss until he reports the unauthorised transaction to the bank. “Any loss occurring after the after the reporting of the unauthorised transaction will be borne by the bank,” the RBI said in the notification ‘Customer protection – limiting liability of customers in unauthorised electronic banking transactions’.
There will be a limited liability in cases where the responsibility for the unauthorised electronic banking transaction lies neither with the bank nor with the customer, but lies elsewhere in the system and when there is a delay — of four to seven working days after receiving the communication from the bank — on the part of the customer in notifying the bank of such a transaction. The per transaction liability of the customer will be limited to the transaction value or the amount mentioned by the RBI , whichever is lower. The liability will be Rs 5,000 for BSBD and SB accounts and pre-paid payment instruments and gift cards and for current/ cash credit/ overdraft accounts of MSMEs.
The liability will be Rs 10,000 for current accounts/ cash credit/ overdraft accounts of individuals with annual average balance (during 365 days preceding the incidence of fraud)/ limit up to Rs 25 lakh and credit cards with limit up to Rs 5 lakh. The liability will be Rs 25,000 for all other current/ cash credit/ overdraft accounts and credit cards with limit above Rs 5 lakh.
According to the RBI, banks must ask their customers to mandatorily register for SMS alerts and wherever available register for e-mail alerts for electronic banking transactions. “The SMS alerts shall mandatorily be sent to the customers, while email alerts may be sent, wherever registered. The customers must be advised to notify their bank of any unauthorised electronic banking transaction at the earliest after the occurrence of such transaction, and informed that the longer the time taken to notify the bank, the higher will be the risk of loss to the bank/ customer. To facilitate this, banks must provide customers with 24×7 access through multiple channels (at a minimum, via website, phone banking, SMS, e-mail, IVR, a dedicated toll-free helpline, reporting to home branch, etc.) for reporting unauthorised transactions that have taken place and/ or loss or theft of payment instrument such as card, etc,” the RBI said.
“Banks shall also enable customers to instantly respond by “Reply” to the SMS and e-mail alerts and the customers should not be required to search for a web page or an e-mail address to notify the objection, if any,” the RBI notification said. Further, a direct link for lodging the complaints, with specific option to report unauthorised electronic transactions shall be provided by banks on home page of their website, it said.
According to the RBI, the loss/ fraud reporting system should also ensure that immediate response (including auto response) is sent to the customers acknowledging the complaint along with the registered complaint number. “The communication systems used by banks to send alerts and receive their responses thereto must record the time and date of delivery of the message and receipt of customer’s response, if any, to them,” it said.
“The banks may not offer facility of electronic transactions, other than ATM cash withdrawals, to customers who do not provide mobile numbers to the bank,” the RBI said. The burden of proving customer liability in case of unauthorised electronic banking transactions will lie on the bank.