Skip to main content

RBI’s steps on frauds will help customers


By limiting the liability, the apex bank is trying to enhance customer confidence in digital transactions

‘Guilty until proven innocent’ — this was the situation that bank customers found themselves in when they reported any fraud. The Reserve Bank of India (RBI), in its latest circular, seems to changing the rules to ‘Innocent until proven guilty’. And, this is a good news for customers.

“The RBI’s latest provisions favour customers. Earlier, if your card was used somewhere; you had to prove you didn’t use it. Now, the onus is on the bank to prove that you used it,” says Navin Chandani, chief business development officer, Bankbazaar.com.

The growing number of customer complaints regarding unauthorised debits from their accounts and cards seems to have impacted the apex bank’s decision. According to experts the new norms will go a long way towards enhancing customer confidence in digital transactions.

The new norms include ‘zero liability’ and ‘limited liability’ for customers. The customer’s liability will be zero in case of contributory fraud, negligence or deficiency on the part of the bank. In such cases, even if he fails to report the matter to the bank, his liability will remain zero.

This is quite in line with global norms. In developed markets like the US, zero or limited liability for customers is already a well-established norm. “In the US, banks do reimburse customers immediately in case of a complaint about an unauthorised transaction, as there they are keen to retain your business. Also, they wish to avoid negative publicity or being fined by the regulator,” says Mumbai-based financial planner Arnav Pandya. The new rules: The customer’s liability will also be zero in case of a third-party breach where the deficiency lies neither with the bank nor with the customer but elsewhere in the system, provided the customer notifies the bank within three working days of receiving the transaction-related notice from the bank.

The customer will, however, have to bear liability if the loss is due to negligence on his part, for instance, if he shares his payment credentials. He will have to bear the entire loss until he reports the unauthorised transaction to the bank. Any unauthorised transaction that takes place after he has reported to the bank will be borne by the latter.

The customer will also have to bear limited liability in case of a third-party breach if there is a delay of four to seven working days (after receiving the communication) in notifying the bank. In this case, the liability could be limited to the transaction value or a specified amount ranging from Rs 5,000 to Rs 25,000 (see table), whichever is lower. If the delay is beyond seven working days, the customer’s liability will depend on the bank Board’s approved policy.

Reassuring move: Experts see this notification as a step in the right direction. “By making it mandatory to send transactions alerts through SMS and e-mails along with a reply option, the RBI is pushing banks to be more transparent in their dispute reporting and resolution mechanism,” says Naveen Kukreja, chief executive officer (CEO) and co-founder, Paisabazaar.com. He adds that the differential liability for customers in case of a third-party breach (depending on when you report) can be seen as an effort to encourage vigilance and early reporting of frauds by customers.

At present, when you carry out a card or online transaction, you do get an SMS/email alert if your mobile number and email ID are registered with the bank. However, if the transaction is unauthorised, you have to use a separate number to inform the bank. “This notification has asked banks and card providers to make provision within the same SMS or email alert for customers to intimate the bank if the transaction is unauthorised. That reply will be treated as final reporting of an unauthorised transaction by the customer,” says Vijay Jasuja, CEO, SBI Cards.

According to the RBI notification, the burden of proving customer liability in case of unauthorised electronic banking transactions will be on the bank. “This provision favours customers. Earlier, if your card was used somewhere; you had to prove you didn’t use it. Now, the onus is on the bank to prove that you used it,” says Navin Chandani, chief business development officer, Bankbazaar.com.

Don’t lower your guard: Disputes can and do arise all the time between banks and card users regarding transactions and frauds. Winning such arguments with an institution is never easy. So, avoid getting into them by following the rule that prevention is better than cure. “Avoid using your credit card on an international web site where two-factor authentication is not required. Similarly, avoid using the card on non-https web sites,” says Arun Ramamurthy, co-founder, Credit Sudhaar.

Business Standard, New Delhi, 10th July 2017

Comments

Popular posts from this blog

Shrinking footprints of foreign banks in India

Shrinking footprints of foreign banks in India Foreign banks are increasingly shrinking their presence in India and are also becoming more conservative than private and public sector counterparts. While many of them have sold some of their businesses in India as part of their global strategy, some are trying to keep their core expertise intact. Others are branching out to newer areas to continue business momentum.For example, HSBC and Barclays Bank in India have got out of the retail business, whereas corporate-focused Standard Chartered Bank is now trying to increase its focus on retail “Building a retail franchise is a huge exercise and takes a long time. You cannot afford to lose it,” said Shashank Joshi, Bank of Tokyo-Mitsubishi UFJ’s India head.According to the Reserve Bank of India (RBI) data, foreign banks’ combined loan book shrunk nearly 10 per cent from Rs 3.78 trillion in fiscal 2015-16 to Rs 3.42 trillion last financial year. The banking industry, which includes foreign banks…

RBI rushes in to prop up falling rupee

RBI rushes in to prop up falling rupee India’s central bank reportedly intervened in the currency markets on Monday to prevent a further slide in the local unit, which breached the 67 mark to a dollar for the first time in 15 months amid a widening trade gap and runaway import bills fuelled by high crude-oil prices. Some state-owned banks were seen selling dollars aggressively, interventions that market dealers attributed to the central bank’s strategy to stem the decline of the Indian rupee against the US currency. The rupee is the worst performing among a dozen Asian monetary units in the past three months. It lost 4.25 per cent to the dollar during the period, show data from Bloomberg. On Monday, the Reserve Bank of India (RBI) is said to have sold about Rs 800 million collectively on the spot and exchange traded futures markets, dealers said. An email sent to RBI remained unanswered until the publication of this report. The currency market has seen such a strong central bank interven…

GST Refund of Rs 20,000 Cr Pending: Exporters’ Body

GST Refund of Rs  20,000 Cr Pending: Exporters’ Body Refund of over Rs 20,000 crore on account of Goods and Services Tax (GST) is pending with the government with more than half the amount stuck as input tax credit, Federation of Indian Export Organisations said on Tuesday. While claims over Rs7,000 crore were cleared in March, the amount was Rs 1,000 crore in April.However, after exporters’ request, the GST council and tax department are organizing a second phase of Special Refund Fortnight starting May 31, which will enable exporters to draw their refunds at a speedy pace. Many exporters have been unable to file the refund of input tax credit due to technical glitches, exports and claim happened in different months. The major challenge lies on ITC refund especially because the process is partly electronic and partly manual which is cumbersome and add to the transaction cost, the exporters’ body said. On IGST, refunds are getting delayed due to airline and shipping companies not submitt…