Digitalisation has made it possible for banks to reach out to their customers living in the remotest areas. One of the consequences, however, is the rise of fraudulent incidences in banking services.

Misuse of credit/debit cards, ATM frauds, online frauds—all are offshoots of sea-level technological changes the Indian banking system has experienced over the last few years. Sadly, customers/investors have minimum bargaining power against banks to resolve and settle such issues. If your account gets debited for transactions that you didn’t perform, recovering the funds is difficult. So, when you try to reason with your bank in such cases, the bank can raise its hands and not be held responsible to resolve it —no matter how genuine your case is.

But, all is not lost. There’s some good news for banking customers…

On July 06, 2017, the RBI issued a circular limiting the liability of customers in unauthorised electronic banking transactions. So, now, if you are a victim of any type of bank fraud, banks will be unable to dictate terms in settling these issues.

Broadly speaking, electronic transactions are of two types:
 

1. Remote transactions  — where you don’t have to present the physical instruments—for example, internet banking, mobile banking, other online transactions, transactions using digital wallets among others.
    
2. Proximity payment transactions  —that require you to present physical payment instruments—viz. –credit/debit card transactions at point of sale or at an ATM.  

  In the recent past, the RBI witnessed a sharp rise in customer grievances pertaining to unauthorised transactions resulting in monetary loss to the customers. On this backdrop, it reviewed the parameters deciding the customers’ liability under such circumstances.   

It has advised banks to do the following: 
 

• Estimate the potential loss happening on account of unauthorised transactions.
• Enhance the security and safety of electronic transactions.
• Set up fraud prevention and detection mechanism.
• Educate investors on using electronic payment systems safely.
   

Dear victim, what changes can you expect?   

Banks will proactively send you SMS’ and emails on your registered mobile number and email intimating you about the transactions performed on your account/card.   

You’re probably thinking, well that’s happening even now, so what has changed?   

The big change will be in the way the “response mechanism” works. If you are to inform the bank about something amiss with your account; first, you would have to search for the helpline number, and then patiently follow the instructions on the IVR System of the customer care number, and then wait even more patiently for the operators assistance. And if you are fortunate enough to get past all these hurdles, you will really have to implore for their help.   

Being aware of this inconvenient route, RBI has issued a strong advisory. “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. 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”, reads the RBI circular.   

This will enable you to report unauthorised transactions almost immediately. One benefit is that the RBI has given customers a grace period of upto 7 working days to limit the liability by reporting unauthorised transactions. In all such cases, the maximum liability will be restricted to Rs 25,000. However, if you report the fraud within first 3 working days, there will be zero liability. In simple words, it means you won’t have to suffer any loss on account of unauthorised transaction.   

Cases of loss due to unauthorised transactions are expected to be disposed off quickly. Since the RBI has categorically mentioned so in the circular— “On being notified 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 (without waiting for settlement of insurance claim, if any).”  

However, reporting of any fraudulent transaction after 7 working days will give banks the leeway to offer a redressal as per the “board approved policy.”   

Banks have indicated that the “zero liability” norms is a big challenge, as there’s always a possibility of some customers attempting to take undue advantage of these norms. This comment from a private banker, made on the condition of anonymity, is quite telling—“We have had cases where the customer swore he had never shared his credentials, but it turned out that the electronic payment was made by family members using the customer's credential."  

Successful implementation of the recently issued RBI guidelines will boost customers’ confidence in using electronic payment systems. To avoid a loss, both banks and customers will become more vigilant, resulting in the overall improvement of the banks’ risk management processes.   

Add Comments