The Reserve Bank of India on Thursday introduced the concept of “zero liability” and “limited liability” for bank customers for any card or online fraud, thus making electronic payments safer for consumers. Under the new directive issued on Thursday, the central bank has also made it mandatory to register all customers for text message alerts and link mobile numbers with bank accounts.
Customers cannot be made liable if they notify the bank within three working days of unauthorised transactions, the RBI said. It has capped customer liability at Rs 25,000 if they report unauthorised transactions within seven working days.
These rules will be applicable for a third party breach – where the deficiency lies neither with the bank nor with the customer, but lies elsewhere in the system.
“With the increased thrust of financial inclusion and customer protection, and considering the recent surge in customer grievances relating to unauthorised transactions, the customer liability in these circumstances has been reviewed,” said the RBI.
The central bank’s latest circular covers both online and face-to-face transactions in stores done using electronic payment methods. The RBI has asked banks to allow customers the option to report unauthorised transactions on their home page.
Consumers will be able to report fraud through other channels, such as phone banking, SMS, email, call centre and interactive voice response.
In August 2016, a proposal to limit customer liability in a fraudulent transaction was floated in a draft circular. The RBI has now come out with the final guidelines.