In a major step to protect customers, the Reserve Bank of India on Thursday proposed zero customer liability in the event of loss due to unauthorised online, ATM or point of sale (POS) transactions in the event such loss has been caused due to fraud or negligence on the part the bank.
In a draft circular issued, RBI has also proposed zero liability on the customer if the loss is reported within three working days even if the cause is not directly linked to deficency on the part of the lender and the fault lies elsewhere in the system.
In cases of unauthorised transactions where the fault lies in the system and not with the lender and the aggrieved customer reports the loss within 4-7 days, the customer liability is proposed to be limited to the transaction value or Rs 5000, whichever is lower.
If the loss is reported beyond 7 days of its occurance, the customer liability shall be determined according to policy approved by the bank’s board.
However, in transactions which involved negligence on the part of the customer, such as where he has shared the payment credentials, entire loss has to be borne by the account holder up to the point the the unauthorised transaction to the bank. Any loss occurring after the reporting of the unauthorised transaction shall be borne by the bank.
The central has bank has said that once informed by the customer, the bank shall credit (shadow reversal) the amount involved in the unauthorised electronic transaction to the customer’s account within 10 working days from the date of such notification by the customer. It has said that banks may use their discretion to decide to waive off any customer liability in case of unauthorised electronic banking transactions even in cases of customer negligence.
The RBI has said that the details of the bank’s policy in regard to customers’ liability has to be displayed policy in public domain for wider dissemination. The existing customers must also be individually informed about the bank’s policy.
The central bank has said the move to strengthen customer protection is being taken due to surge in grievances relating to unauthorised transactions resulting in erroneous debits to their accounts/cards through online, ATM and POS transactions.
Here is RBI’s proposal in a nutshell on fraudulent transaction