RBI issues direction limiting customer liability in online banking - (06 Jul 2017)

Banking

RBI has issued direction limiting liability of customers due to recent increase in customer grievances related to unauthorised transactions. Directions would protect interest of customers in unauthorised ‘Electronic Banking Transactions’. A proposal to limit customer liability in a fraudulent transaction was first introduced in August 2016. RBI has now come out with the final guidelines due to rise in customer’s complaint of fraudulent online transaction.

In case of a customer reporting their loss through online banking transactions within three days, then amount involved will be credited to their accounts within a time period of 10 days. If there is delay of four to seven working days, on part of customer relating to information of third party fraud, then in that case, liability of customer would be up to Rs 25,000. However, If unauthorised transaction is communicated by customer after seven days, then liability of customer would be determined as per bank’s Board approved policy.

“Zero liability of a customer” would arise in case of third party breach where deficiency lies “neither with bank nor with customer but lies elsewhere in system”. In addition, when unauthorised transaction occurs due to “contributory fraud/negligence/deficiency on part of the bank (irrespective of whether or not transaction is reported by customer)” amount involved in unauthorised electronic transaction has to be credited in customer’s account within 10 working days of reporting of fraud. As per the Notification, Banks have discretion to waive off any customer liability in case of unauthorised electronic banking transactions even in cases of customer negligence.

Banks must to ask their customer to mandatorily register for SMS alerts and e-mail for email alerts for electronic banking transactions. Customers must be advised to notify their bank of any unauthorised electronic banking transaction at earliest after occurrence of such transaction. To facilitate this, banks must provide customers with 24x7 access through multiple channels (at a minimum, via website, phone banking, SMS, e-mail, IVR, a dedicated toll-free helpline, reporting to home branch, etc.) for reporting unauthorised transactions that have taken place and/ or loss or theft of payment instrument such as card, etc. 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. Loss/ fraud reporting system shall also ensure that, immediate response (including auto response) is sent to customers acknowledging complaint along with registered complaint number. Burden of proving customer liability in case of unauthorised electronic banking transactions shall lie on bank. Banks shall put in place a suitable mechanism and structure for reporting of customer liability cases to Board or one of its Committees. All such transactions shall be reviewed by the bank’s internal auditors.

Tags : LIMITED LIABILITY ONLINE BANKING DIRECTIONS