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Net banking frauds: RBI sets customer liability norms

If the customer’s own involvement is not clearly established, customer liability will be limited to a maximum of Rs 5,000 if he reports within 4 to 7 working days.

By: ENS Economic Bureau | Mumbai | Published: August 12, 2016 1:36:38 am
rbi, online banking, online banking frauds,  reserve bank of india, cyber security, rbi cyber security, rbi on cyber security, online banking, online banking system If the delay in reporting is beyond seven working days, the customer liability will be determined as per bank’s board approved policy.

With online bank frauds on the rise, the Reserve Bank of India (RBI) has proposed that a customer will not be liable to make the payment if the fraud or negligence is on part of the bank and the customer notifies the lender within three working days of receiving communication from the bank regarding unauthorised transaction by a third party.

If the customer’s own involvement is not clearly established, customer liability will be limited to a maximum of Rs 5,000 if he reports within 4 to 7 working days. A customer’s entitlement to zero liability shall arise where the security architecture and systems of the bank for electronic banking transactions are not able to protect the customer for fraud/ negligence on the part of the bank, the RBI said in its draft norms.

“In third party breach where the fault 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 an unauthorised transaction, the customer liability will be zero,” the RBI said in its draft circular on ‘Customer protection — limiting liability of customers in unauthorised electronic banking transactions’.

However, a customer will be liable for the loss occurring due to fraudulent transactions in cases involving negligence 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 reporting of the unauthorised transaction will be borne by the bank, the RBI said.

“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) on the part of the customer in notifying the bank of such a transaction, the customer liability shall be limited to the transaction value or Rs 5,000, whichever is lower,” it said.

Further, if the delay in reporting is beyond seven working days, the customer liability will be determined as per bank’s board approved policy.

Banks should provide the details of the bank’s policy in regard to customers’ liability formulated in pursuance of these directions at the time of opening the accounts. Banks should also display their approved policy in public domain for wider dissemination. The existing customers must also be individually informed about the bank’s policy.

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