RBI move to shield customers good

The Reserve Bank of India (RBI) has issued a circular to reduce liability of customers in an unauthorised electronic banking transaction. In the case of contributory fraud or negligence or deficiency from the bank, the customer will have zero liability irrespective of whether or not the unauthorised transaction is reported. In the case of a third party breach also, where responsibility lies “neither with the customer nor the bank”, the customer will be fully compensated if the transaction is reported within three working days of the notification of the transaction from the bank. The RBI has also asked banks to put in place a mechanism to handle communication related to electronic banking and to resolve customer grievances within stipulated time. The banks will now have to keep a record of the timeline from the receipt of a grievance to its disposal and payment of the compensation.

The move to beef up security norms for digital transactions is a step in the right direction and will support the government’s push for digital India. According to the RBI, the incidence of ATM, credit card, debit card and net banking-related fraud has gone up by more than 35% between 2012-13 and 2015-16 in India. Addressing the problem leaves no room for complacency as the government moves towards digitalising the economy and wants every citizen to have a bank account. However, even though the RBI has taken proactive steps to safeguard the interests of bank customers, the guidelines fall short. While banks are saving costs by making most operations automated, not every bank customer understands machines. Unlike the US or other developed countries, a large section of India’s population, even within metros, is not very savvy with modern day technology. Since they are being forced to go digital by banks, it is the responsibility of the Indian banking sector to ensure that there is no victimisation of the naive customers.

The rules about fraud due to negligence of the account holder must take into account that most bank frauds occur due to customers’ ignorance and unfamiliarity with the new age banking ecosystem. The RBI should ensure that banks deploy staff to help customers with their transactions in ATMs located in the bank’s branch. Another area of concern is the payment gateways that help conduct fraudulent transactions. Many online phishing syndicates dupe customers by creating fake websites for products that customers are looking to purchase. The payments to these online frauds happen through some payment gateways, which need to be blacklisted through an information sharing mechanism between banks. As of now, banks do not take any action against such payment gateways, unless the customer holds some influence.