RBI mulls liability cover in fraud for bank clients

The Reserve Bank of India (RBI) on Thursday proposed that a customer should have zero liability in case of a third-party fraud on the account or card, provided the customer notifies the bank within three working days of receiving the communication from the bank regarding an unauthorised transaction. In case of delay in reporting, the liability should be limited to not more than Rs 5,000, RBI said.

For sure, the zero liability can be claimed only if the customer is not fully or partly responsible for such unauthorised transactions to take place. If the bank is responsible for the fraud, the customer is automatically absolved of any liability.

SEEKING COVER

• In case of delay in reporting, the liability should be limited to not more than Rs 5,000, RBI said
• Zero liability can be claimed only if the customer is not fully or partly responsible for such unauthorised transactions to take place
• It will be mandatory for a customer to register for alerts for electronic banking transactions, RBI said in draft guidelines on customer protection on its website

It will be mandatory for a customer to register for alerts for electronic banking transactions, RBI said in draft guidelines on customer protection on its website.

However, the customer will be liable in a limited manner if the negligence is on the part of the customer, such as where she has shared payment credentials.

In such cases, "the customer will bear the entire loss until he reports the unauthorised transaction to the bank. Any loss occurring after the reporting of the unauthorised transaction shall be borne by the bank," the draft guidelines said.

In cases where the responsibility for the unauthorised electronic banking transaction lies neither with the bank nor with the customer but lies elsewhere in the system and when there is a delay of four to seven working days on the part of the customer in notifying the bank of such a transaction, the customer liability shall be limited to the transaction value or Rs 5000, whichever is lower.

If the delay in reporting is beyond seven working days, the customer's liability shall be determined according to a bank's policy.

On being notified by the customer, the bank shall credit 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.

Further, the bank should ensure that the complaint is resolved within 90 days from the date of reporting; and "in case of debit card/bank account the customer does not lose out on interest, and in case of credit card the customer does not bear any additional burden of interest," RBI's draft guidelines said.

"The burden of proving customer liability in case of unauthorised electronic banking transactions shall lie on the bank," RBI said.