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RBI’s Draft for Limiting Liability of Customers in Unauthorized Electronic Banking Transactions

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RBI has come up with a Draft Circular for public comments on “Limited Liability” for customers in case of frauds in Internet Banking and Card transactions.

  • RBI has also proposed zero liability on the customer if the loss is reported within three working days even if the cause is not directly linked to deficiency on the part of the lender and the fault lies elsewhere in the system.

Liability of a Customer :-

  •  Zero Liability of a Customer – A customer’s entitlement to zero liability shall arise where the security architecture and systems of the bank for electronic banking transactions are not able to protect the customer in the following events:
  •  Fraud/ negligence on the part of the bank.
  •  Third party breach where the fault lies neither with the bank nor with the customer but lies elsewhere in the system, and the customer notifies the bank within three working daysof receiving the communication from the bank regarding an unauthorized transaction

Limited Liability of a Customer – A customer shall be liable for the loss occurring due to fraudulent transactions in the following cases:

  • In cases involving negligence by a customer, such as where he has shared the payment credentials, the customer will bear the entire loss until he reports the unauthorized transaction to the bank. Any loss occurring after the reporting of the unauthorized transaction shall be borne by the bank.RBI
  • In cases where the responsibility for the unauthorized electronic banking transaction lies neither with the bank nor with the customer but lies elsewhere in the system and when there is a delay 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. Further, if the delay in reporting is beyond seven working days, the customer liability shall be determined as per bank’s Board approved policy.
  • Banks shall provide the details of the bank’s policy in regard to customers’ liability formulated in pursuance of these directions at the time of opening the accounts. Banks shall display their approved policy in public domain for wider dissemination. The existing customers must also be individually informed about the bank’s policy.

Time taken to report the fraudulent transaction from the date of receiving the communicationCustomer’s liability (₹)
Within 3 working daysZero liability
Within 4 – 7 working days of receiving the communicationThe transaction value or ₹ 5000/-, whichever is lower
Beyond 7 working days of receiving the communicationAs per bank’s Board approved policy

Surplus Transfer:-

RBI Central Board approved the transfer of surplus of the Reserve Bank for the year 2015-16 amounting to Rs 658.76 billion to the Government of India. It is noted that the amount was Rs 65,896 crore for the previous year.

  • The approval to transfer the surplus was taken at the 559th meeting of the Central Board of the RBI, chaired by Governor Raghuram Rajan.
  • The Reserve Bank of India(RBI) will transfer surplus profit of Rs 65,876 crore to the Indian government as because the RBI follows the July-June accounting year.
  • The board reviewed the current economic situation, global and domestic challenges and policy responses and other specific areas in the working of the Reserve Bank. It also discussed the draft Annual Report of the Reserve Bank for the year 2015-16.
  • The surplus approved by the Reserve Bank of India board could be used to fund the centre’s fiscal deficit. It is noted that the centre’s first quarter fiscal deficit stood at 61.1% of the full year estimate, much higher than previous year’s 51.1%.
  • RBI has bought bonds worth Rs 1.85 lakh crore and its overall balance sheet expanded by 35%, or a record Rs 3.8 lakh crore. Its total balance sheet size as on July 1 was Rs 32.4 lakh crore.