Frauds

Mumbai: The Reserve Bank on Wednesday, June 24, said in case of complaints of fraudulent electronic banking transactions via a credit card, a bank should provide shadow reversal or provisional credit of the disputed amount within 5 days from the date of customer notification. The RBI has issued a revised framework on limiting customer liability in digital transactions. A bank should design its systems and procedures to make customers feel safe about carrying out electronic banking transactions (EBTs), and it should put in place appropriate systems and procedures to ensure the safety and security of EBTs carried out by customers, the amended norms said. "A bank shall mandatorily send instant SMS alerts to its customers for all EBTs of value more than Rs 500. For EBTs of value up to Rs 500, a bank may decide to send instant SMS as per its internal policy but without any charge to the customer," the RBI said. Rule to come into effect January 2027 These norms will come into effect from January 1, 2027. Also, the bank’s communication systems, deployed for sending alerts and receiving the responses, shall record the date and time of delivery of the message and receipt of the customer’s response, if any. On receipt of a complaint regarding any fraudulent EBT from a customer, a bank shall take prompt steps to prevent further unauthorised EBTs in the customer’s account, the RBI said. "A customer shall be entitled to zero liability and reversal of the transaction in cases where the fraudulent EBT occurs due to negligence / deficiency on the part of the bank, irrespective of whether the transaction is reported by the customer or not," it said. Further, a customer should be entitled to "zero liability and reversal of the transaction" in cases of third-party breach where the customer reports the unauthorised fraudulent EBT to the bank within five calendar days from the date of its occurrence, the RBI said. In cases of third-party breach reported to the bank after five calendar days, the customer’s liability shall be determined as per the bank’s policy. In March, the central bank, through draft directions, had proposed to enhance the scope of existing instructions on limiting the liability of customers in unauthorised EBTs. It had also proposed to cover other categories of fraudulent EBTs, reduce the time taken by banks to process complaints related to fraudulent EBTs, and introduce a compensation mechanism for small-value fraudulent transactions. The RBI said the feedback received on the draft directions has been examined and the consequent modifications have been suitably incorporated in the final amendment directions. In cases where the bank is required to reverse a fraudulent EBT, it shall ensure that the reversal is value dated to its original date of occurrence and the customer does not suffer loss of interest or bear any additional burden of interest/charges, as applicable. Some stakeholders had suggested the incorporation of the provision related to shadow reversal in case of fraudulent EBTs in credit cards, which was accepted by RBI. "In case of a complaint arising out of fraudulent EBTs in a credit card, a bank shall provide shadow reversal equivalent to the amount involved in the fraudulent EBTs within five calendar days from the date of receipt of notification from the customer, " RBI said. The RBI has issued separate directions for commercial banks, small finance banks, payment banks, local area banks, and cooperative banks. The RBI further said that in cases where the fraudulent EBT occurs due to negligence by the customer, he/she should be liable for the loss incurred, to the extent of loss not eligible for compensation. "Loss arising from any unauthorised transaction occurring after the reporting of the fraudulent EBT by a customer to a bank shall be borne by the bank," it added. On compensation for small value fraudulent EBTs, the RBI said a bona fide victim who has lodged a complaint involving gross loss of an amount up to Rs 50,000 on account of fraudulent EBTs should be compensated 85 per cent of the net loss amount or Rs 25,000, whichever is less, "once during her/ his lifetime". For a complaint related to fraudulent EBTs involving a loss amount of less than Rs 29,412, where a compensation of 85 per cent is paid, 65 per cent should be borne by the Reserve Bank, 10 per cent by the customer’s bank and the remaining 10 per cent by the beneficiary bank in case of a complaint arising out of domestic fraud.

Frauds

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