RBI looking to limit customer liability in banking frauds

The Reserve Bank of India is looking to issue a regulatory direction to limit the liability of a customer on account of fraudulent transactions arising out of frauds and electronic banking transactions, according to SS Mundra Deputy Governor.

“It is a work-in-progress and we expect to come out with a framework very soon,” Mundra said at an event organised by the Banking Codes and Standards Board of India (BCSBI) — the agency entrusted with framing codes and standards for delivery of customer service for individuals and micro small and medium enterprises.

Currently, a customer’s liability in the event of any unauthorised transaction is the lesser of actual loss at the time of notifying the bank, balance available for withdrawal, withdrawal limit set by the customer for a transaction or ₹10,000.

Mundra observed that complaints of unauthorised fund transfers had increased with increasing number of online transactions. This, he said, was being done by the use of duplicate cards for fraudulently withdrawing money from ATMs besides use of phishing emails to extract customer information.

Customer confidence It is imperative to have a robust mechanism to prevent frauds in mobile/Net banking and electronic fund transfers so as to retain customer confidence in these delivery channels.

These channels are essential for banks in order to face competition, reduce operating costs and increase customer base, Mundra said.

He added that once customers lose confidence in these channels, they would migrate or start using traditional channels which, in turn, would increase operating cost.

He felt it was the responsibility of banks to raise customer awareness on the safe usage of these channels and should be on top of their agenda.

“Whenever this kind of dispute comes, banks say that the customer did not exercise necessary safeguards or they compromised their password, which is why this must have happened.”

When you introduce new processes it is also incumbent upon the bank to educate the customers to increase their awareness.”

On the issue of ATMs, Mundra said that the RBI would be taking necessary action against banks for any violations with regard to regulatory instructions on display material, providing facilities for differently-abled, and the like.

Survey of ATMs “Incidentally, our teams have recently undertaken a survey of almost 4,000 ATMs across the country with sample size fairly representing geographies and bank categories.

The survey results are not comforting in any way. Almost one-third of the ATMs were found to be not working at that point,” Mundra said.

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