Bank customers to get instant SMS for transactions above Rs.500, Banks to provide compensation also in case of Frauds
The Reserve Bank of India (RBI) has issued draft guidelines to strengthen the safety of Electronic Banking Transactions (EBTs) and protect customers from online fraud.
Banks Must Send Transaction Alerts
Banks must collect and verify the customer’s mobile number and, wherever available, email address. Banks must send instant SMS alerts for all electronic banking transactions above ₹500. For transactions of ₹500 or less, banks may send SMS alerts as per their internal policy, but customers cannot be charged for these alerts.
Banks must send email alerts for all electronic banking transactions if the customer has registered an email address. Alerts should include details such as: Account or card number, Transaction amount, Date and time, Transaction channel and Beneficiary or merchant details.
How Customers Can Report Fraud
Banks must provide customers with multiple 24×7 channels to report fraudulent transactions, including: Phone banking, SMS, Mobile app, Instant messaging, Email, IVR, Toll-free helpline, Home branch.
Banks must also:
- Include a number in the transaction SMS so customers can immediately report unauthorised transactions.
- Provide a direct link on their website and mobile app to report fraud.
- Advise customers to report fraud immediately to both the bank and the National Cyber Crime Reporting Portal or Cyber Crime Helpline (1930).
Banks Must Acknowledge Complaints
- Banks must immediately register every fraud report as a complaint.
- Customers must receive an acknowledgement with:
- Complaint number
- Date and time of complaint
- Banks must also take immediate steps to prevent further unauthorised transactions.
Customer Liability for Fraudulent Transactions
Zero Liability for Customers
Customers will have zero liability if: The fraud happened due to negligence or deficiency on the part of the bank or The fraud was caused by a third party and the customer reports it to the bank within five calendar days.
Customer Liability
Customers may have to bear the loss if: The fraud happened due to the customer’s own negligence or The customer delays reporting the fraudulent transaction beyond five days. In such cases, liability will be decided according to the bank’s policy.
After Reporting Fraud
Once the customer reports the fraudulent transaction, any further unauthorised transactions will be the bank’s responsibility. Banks may also decide to waive the customer’s liability in deserving cases.
Time Limit for Banks to Resolve Complaints
Banks must complete the investigation and decide customer liability within:
- 45 days for domestic fraud cases.
- 60 days for cross-border fraud cases.
Reversal of Fraudulent Transactions
- If the customer is entitled to a refund, the bank must reverse the transaction from the original transaction date.
- Customers should not lose interest or pay extra charges because of the fraud.
- In case of credit card fraud, banks must provide a shadow reversal within five calendar days of receiving the complaint.
If the Complaint is Rejected
If the bank rejects the complaint, it must: Clearly explain the reason for rejection and Provide supporting details for its decision.
Compensation for Small Value Fraud Cases
RBI has proposed a compensation scheme for genuine victims. A customer may receive compensation if:
- The fraud loss is up to ₹50,000.
- The fraud is found to be genuine.
- The customer reports the fraud to both the bank and the National Cyber Crime Reporting Portal or Helpline 1930 within five calendar days.
Compensation Amount
- The customer will receive 85% of the net loss, subject to a maximum of ₹25,000.
- This compensation can be claimed only once during the customer’s lifetime.
The compensation amount will be shared by RBI, the customer’s bank and, where applicable, the beneficiary bank as specified in the draft guidelines.
The customer’s bank shall, within five calendar days of receipt of the application from a customer, compensate the customer as given above. The customer’s bank shall, within five calendar days of receipt of the application from a customer, compensate the customer as given above. The application for reimbursement, duly signed by a Senior Executive identified by the Top Management of the bank, shall be submitted through email to dea.fund@rbi.org.in within 30 calendar days from the end of the respective quarter.
Example 1
Suppose a customer loses ₹40,000 due to a fraudulent electronic banking transaction. Before paying compensation, the bank manages to recover ₹15,000 and credits it back to the customer’s account. This reduces the customer’s actual loss to ₹25,000. Under the RBI’s draft guidelines, the customer is eligible for compensation equal to 85% of the net loss, which comes to ₹21,250. Out of this amount, the Reserve Bank of India (RBI) will contribute ₹16,250, while the customer’s bank and the beneficiary bank will contribute ₹2,500 each.
Example 2
In this example, the customer loses ₹40,000 due to fraud and initially receives the maximum compensation of ₹25,000. This compensation is shared by the RBI (₹19,118), the customer’s bank (₹2,941), and the beneficiary bank (₹2,941). Later, the bank successfully recovers the full ₹40,000 from the fraudster. Since the customer has already received ₹25,000 as compensation, only the remaining ₹15,000 is paid to the customer. The recovered amount is then distributed among the RBI, the customer’s bank, and the beneficiary bank to recover the compensation they had paid earlier.
Example 3
In this case, the customer loses ₹40,000 and immediately receives the maximum compensation of ₹25,000. Later, the bank recovers only ₹15,000 from the fraudster. After this recovery, the customer’s actual loss becomes ₹25,000. According to the RBI guidelines, the customer should receive 85% of ₹25,000, which is ₹21,250. However, since the customer has already received ₹25,000, which is ₹3,750 more than the eligible compensation, the recovered amount is adjusted accordingly. Out of the recovered ₹15,000, the customer receives ₹11,250, while the remaining amount is returned to the RBI (₹2,868), the customer’s bank (₹441), and the beneficiary bank (₹441) to balance the excess compensation paid earlier.
Click here to download RBI Circular
