RBI/2017-18/15
DBR.No.Leg.BC.78/09.07.005/2017-18
July
6, 2017
All
Scheduled Commercial Banks (including RRBs)
All Small Finance Banks and Payments Banks
Dear
Sir/ Madam,
Customer Protection – Limiting Liability of
Customers in Unauthorised Electronic Banking Transactions
2.
With the increased thrust on financial inclusion and customer protection
and considering the recent surge in customer grievances relating to
unauthorised transactions resulting in debits to their accounts/ cards, the
criteria for determining the customer liability in these circumstances have
been reviewed. The revised directions in this regard are set out below.
Strengthening of systems and procedures
3.
Broadly, the electronic banking transactions can be divided into two
categories:
i. Remote/
online payment transactions (transactions that do not require physical
payment instruments to be presented at the point of transactions e.g.
internet banking, mobile banking, card not present (CNP) transactions),
Pre-paid Payment Instruments (PPI), and
ii.Face-to-face/
proximity payment transactions (transactions which require the physical
payment instrument such as a card or mobile phone to be present at the
point of transaction e.g. ATM, POS, etc.)
4.
The systems and procedures in banks must be designed to make customers feel
safe about carrying out electronic banking transactions. To achieve this,
banks must put in place:
i. appropriate
systems and procedures to ensure safety and security of electronic banking
transactions carried out by customers;
ii. robust
and dynamic fraud detection and prevention mechanism;
iii. mechanism
to assess the risks (for example, gaps in the bank’s existing systems)
resulting from unauthorised transactions and measure the liabilities
arising out of such events;
iv.appropriate
measures to mitigate the risks and protect themselves against the
liabilities arising therefrom; and
v.a
system of continually and repeatedly advising customers on how to protect
themselves from electronic banking and payments related fraud.
Reporting of unauthorised transactions by
customers to banks
5.
Banks must ask their customers to mandatorily register for SMS alerts and
wherever available register for e-mail alerts, for electronic banking
transactions. The SMS alerts shall mandatorily be sent to the customers,
while email alerts may be sent, wherever registered. The customers must be
advised to notify their bank of any unauthorised electronic banking
transaction at the earliest after the occurrence of such transaction, and
informed that the longer the time taken to notify the bank, the higher will
be the risk of loss to the bank/ customer. To facilitate this, banks must
provide customers with 24x7 access through multiple channels (at a minimum,
via website, phone banking, SMS, e-mail, IVR, a dedicated toll-free
helpline, reporting to home branch, etc.) for reporting unauthorised transactions
that have taken place and/ or loss or theft of payment instrument such as
card, etc. Banks shall also enable customers to instantly respond by
"Reply" to the SMS and e-mail alerts and the customers should not
be required to search for a web page or an e-mail address to notify the
objection, if any. Further, a direct link for lodging the complaints, with
specific option to report unauthorised electronic transactions shall be
provided by banks on home page of their website. The loss/ fraud reporting
system shall also ensure that immediate response (including auto response)
is sent to the customers acknowledging the complaint along with the
registered complaint number. The communication systems used by banks to
send alerts and receive their responses thereto must record the time and
date of delivery of the message and receipt of customer’s response, if any,
to them. This shall be important in determining the extent of a customer’s
liability. The banks may not offer facility of electronic transactions, other
than ATM cash withdrawals, to customers who do not provide mobile numbers
to the bank. On receipt of report of an unauthorised transaction from the
customer, banks must take immediate steps to prevent further unauthorised
transactions in the account.
Limited Liability of a Customer
(a) Zero Liability of a Customer
6.
A customer’s entitlement to zero liability shall arise where the
unauthorised transaction occurs in the following events:
i. Contributory
fraud/ negligence/ deficiency on the part of the bank (irrespective of
whether or not the transaction is reported by the customer).
ii. Third
party breach where the deficiency lies neither with the bank nor with the
customer but lies elsewhere in the system, and the customer notifies the
bank within three
working days of
receiving the communication from the bank regarding the unauthorised
transaction.
(b) Limited Liability of a Customer
7.
A customer shall be liable for the loss occurring due to unauthorised
transactions in the following cases:
i.In
cases where the loss is due to negligence by a customer, such as where he
has shared the payment credentials, the customer will bear the entire loss
until he reports the unauthorised transaction to the bank. Any loss
occurring after the reporting of the unauthorised transaction shall be
borne by the bank.
ii.In
cases where the responsibility for the unauthorised electronic banking
transaction lies neither with the bank nor with the customer, but lies
elsewhere in the system and when there is a delay (of four to seven working days after
receiving the communication from the bank) on the part of the customer in
notifying the bank of such a transaction, the per transaction liability of
the customer shall be limited to the transaction value or the amount
mentioned in Table 1,
whichever is lower.
Table 1
|
Maximum Liability of a
Customer under paragraph 7 (ii)
|
Type of Account
|
Maximum liability
(₹)
|
• BSBD Accounts
|
5,000
|
• All other SB
accounts
• Pre-paid Payment Instruments and Gift Cards
• Current/ Cash Credit/ Overdraft Accounts of MSMEs
• Current Accounts/ Cash Credit/ Overdraft Accounts of Individuals with
annual average balance (during 365 days preceding the incidence of
fraud)/ limit up to Rs.25 lakh
• Credit cards with limit up to Rs.5 lakh
|
10,000
|
• All other
Current/ Cash Credit/ Overdraft Accounts
• Credit cards with limit above Rs.5 lakh
|
25,000
|
Further,
if the delay in reporting is beyond seven working days, the customer
liability shall be determined as per the bank’s Board approved policy.
Banks shall provide the details of their policy in regard to customers’
liability formulated in pursuance of these directions at the time of
opening the accounts. Banks shall also display their approved policy in
public domain for wider dissemination. The existing customers must also be
individually informed about the bank’s policy.
8.
Overall liability of the customer in third party breaches, as detailed
in paragraph 6
(ii) and paragraph 7
(ii) above, where the deficiency lies neither with the bank
nor with the customer but lies elsewhere in the system, is summarised in
the Table 2:
Table 2
|
Summary of Customer’s
Liability
|
Time taken to report the
fraudulent transaction from the date of receiving the communication
|
Customer’s liability (₹)
|
Within 3
working days
|
Zero liability
|
Within 4 to 7
working days
|
The transaction
value or the amount mentioned in Table 1,
whichever is lower
|
Beyond 7
working days
|
As per bank’s
Board approved policy
|
The
number of working days mentioned in Table 2 shall
be counted as per the working schedule of the home branch of the customer
excluding the date of receiving the communication.
Reversal Timeline for Zero Liability/ Limited
Liability of customer
9.
On being notified by the customer, the bank shall credit (shadow reversal)
the amount involved in the unauthorised electronic transaction to the
customer’s account within 10 working days from the date of such
notification by the customer (without waiting for settlement of insurance
claim, if any). Banks may also at their discretion decide to waive off any
customer liability in case of unauthorised electronic banking transactions
even in cases of customer negligence. The credit shall be value dated to be
as of the date of the unauthorised transaction.
10.
Further, banks shall ensure that:
i. a
complaint is resolved and liability of the customer, if any, established
within such time, as may be specified in the bank’s Board approved policy,
but not exceeding 90 days from the date of receipt of the complaint, and
the customer is compensated as per provisions of paragraphs 6 to
9 above;
ii. where
it is unable to resolve the complaint or determine the customer liability,
if any, within 90 days, the compensation as prescribed in paragraphs 6 to
9 is paid to the customer; and
iii.
in
case of debit card/ bank account, the customer does not suffer loss of
interest, and in case of credit card, the customer does not bear any
additional burden of interest.
Board Approved Policy for Customer Protection
11.Taking into account the risks arising out of unauthorised debits to
customer accounts owing to customer negligence/ bank negligence/ banking
system frauds/ third party breaches, banks need to clearly define the
rights and obligations of customers in case of unauthorised transactions in
specified scenarios. Banks shall formulate/ revise their customer relations
policy, with approval of their Boards, to cover aspects of customer
protection, including the mechanism of creating customer awareness on the
risks and responsibilities involved in electronic banking transactions and
customer liability in such cases of unauthorised electronic banking
transactions. The policy must be transparent, non-discriminatory and should
stipulate the mechanism of compensating the customers for the unauthorised
electronic banking transactions and also prescribe the timelines for
effecting such compensation keeping in view the instructions contained
in paragraph 10 above.
The policy shall be displayed on the bank’s website along with the details
of grievance handling/ escalation procedure. The instructions contained in
this circular shall be incorporated in the policy.
Burden of Proof
12.
The burden of proving customer liability in case of unauthorised electronic
banking transactions shall lie on the bank.
Reporting and Monitoring Requirements
13.
The banks shall put in place a suitable mechanism and structure for the
reporting of the customer liability cases to the Board or one of its
Committees. The reporting shall, inter alia, include volume/ number of
cases and the aggregate value involved and distribution across various
categories of cases viz., card present transactions, card not present
transactions, internet banking, mobile banking, ATM transactions, etc. The
Standing Committee on Customer Service in each bank shall periodically
review the unauthorised electronic banking transactions reported by
customers or otherwise, as also the action taken thereon, the functioning
of the grievance redress mechanism and take appropriate measures to improve
the systems and procedures. All such transactions shall be reviewed by the
bank’s internal auditors.
Yours
faithfully,
(Prakash
Baliarsingh)
Chief General Manager
Annex
Instructions in our Master Circular on Credit
Card, Debit Card and Rupee Denominated Co-branded Pre-paid Card Operations
of Banks and Credit card issuing NBFCs (DBR.No.FSD.BC.18/24.01.009/2015-16 dated July 1, 2015)
which stand revised in respect of Scheduled Commercial Banks
Sr. No.
|
Existing Instructions
|
Revised instructions in
this circular (Para No.)
|
|
Para No.
|
Instructions
|
|
1
|
I.14.1
|
Banks/ NBFCs
should set up internal control systems to combat frauds and actively
participate in fraud prevention committees/ task forces which formulate
laws to prevent frauds and take proactive fraud control and enforcement
measures.
|
4
|
2
|
II.7.(viii)(c)
|
7. Terms and
conditions for issue of cards to customers:
(viii) (c) The terms shall put the cardholder under an obligation to
notify the bank immediately after becoming aware:
- of the loss or theft or copying of the card or the means which enable
it to be used;
- of the recording on the cardholder’s account of any unauthorised
transaction; and
- of any error or other irregularity in the maintaining of that account
by the bank.
|
5
|
3
|
II.7.(viii)(d)
|
(viii) (d): The
terms shall specify a contact point to which such notification can be
made. Such notification can be made at any time of the day or night.
|
5
|
4
|
II.7.(x)
|
The terms shall
specify that the bank shall be responsible for direct losses incurred by
a cardholder due to a system malfunction directly within the bank’s
control. However, the bank shall not be held liable for any loss caused
by a technical breakdown of the payment system if the breakdown of the
system was recognizable for the cardholder by a message on the display of
the device or otherwise known. The responsibility of the bank for the
non-execution or defective execution of the transaction is limited to the
principal sum and the loss of interest subject to the provisions of the
law governing the terms.
|
6 & 7
|
5
|
II.9.(i)
|
The bank shall
ensure full security of the debit card. The security of the debit card
shall be the responsibility of the bank and the losses incurred by any
party on account of breach of security or failure of the security
mechanism shall be borne by the bank.
|
4, 6 & 7
|
6
|
II.9.(iv)
|
iv) The
cardholder shall bear the loss sustained up to the time of notification
to the bank of any loss, theft or copying of the card but only up to a
certain limit (of fixed amount or a percentage of the transaction agreed
upon in advance between the cardholder and the bank), except where the
cardholder acted fraudulently, knowingly or with extreme negligence.
|
6 & 7
|
7
|
II.9.(v)
|
Each bank shall
provide means whereby his customers may at any time of the day or night
notify the loss, theft or copying of their payment devices.
|
5
|
8
|
II.9.(vi)
|
On receipt of
notification of the loss, theft or copying of the card, the bank shall take
all action open to it to stop any further use of the card.
|
5
|
|
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