By Snigdha Kalra
In order to protect customers from bank fraud, the Reserve Bank of India (RBI) laid out norms to limit the liability of the consumer on Thursday. In a notification to commercial banks, the RBI said that in the case of fraud, the liability of the account holders would be limited to a fixed amount. This amount would be Rs 5,000 in the case of savings accounts, Rs 10,000 for both current accounts as well as overdraft accounts with balance up to Rs 25 lakh, and Rs 25,000 for accounts with a balance above Rs 25 lakh.
The new norms
The RBI has directed the banks to link their customers’ bank accounts to their mobile numbers. Banks are required to send prompt alerts to the customers through SMS and email for all transactions. This will help them remain aware of any unauthorised transactions in their account.
“Banks shall also enable customers to instantly respond with the help of ‘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 notification said. Banks are also supposed to allow the reporting of online fraud on their website’s homepage.
Cases of fraudulent transactions
If the transaction occurred due to negligence on part of the bank, the customer will suffer zero liability for the loss incurred. The onus will fall on the bank to compensate him. However, if the cause for fraud is negligence by the customer, he will be responsible for the losses till he reports it to the bank. Any subsequent losses will be covered by the bank.
In the case that a third party caused the loss, there are three separate cases. If the customer reports it to the bank within three days of the receipt of an alert, the bank will be liable for the loss. However, if the customer reports it to the bank within 4-7 days of the receipt of an alert, he will bear limited liability as per the norms mentioned. If the customer reports the fraud after 7 days, he will be liable to an amount decided as per his bank’s policy.
Once the customer has reported the fraud, the bank has to credit the amount involved in the unauthorised transaction to his account within 10 working days.
How is the customer protected?
Through these norms, the RBI has put the onus of checking fraudulent activities largely on banks. “With the increased thrust on financial inclusion and customer protection and considering the recent surge in customer grievances relating to unauthorised transactions resulting in debits to their accounts/cards, the criteria for determining the customer liability in these circumstances have been reviewed,” the RBI said in its notification.
Since the banks are required to compensate their customers for any unauthorised transactions, they will ensure that such incidents are minimised. The SMS alerts will lead to a prompt provision of information to consumers. The reply feature will catalyse redressal of customer complaints.
This provides customers protection against fraudulent activities on their accounts through an electronic medium. It will also reduce customers’ apprehension about online banking, and facilitate greater financial inclusion.
Featured Image Source: Wikimedia Commons
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