Online banking fraud liability: In the wake of rising number of online frauds across the country, it has become necessary for customers to be aware of rules that will help them recover their losses if they fall prey to frauds. India's banking regulator, Reserve Bank of India has clearly set out the terms and conditions under which the customers have zero or limited liability. Here's a look at the conditions under which customers have zero liability:

Online frauds: Zero Liability of a customer

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An RBI notification dated July 6, 2017 says a customer’s "entitlement to zero liability" will arise if the unauthorised transaction takes place in the following events:

1. "Contributory fraud/negligence/deficiency on the part of the bank (irrespective of whether or not the transaction is reported by the customer)". In other words, the customer will be entitled to zero liability if the unauthorised transaction, or the fraud, has happened because of the bank's fault. The bank will have to pay for the loss even if the customer fails to report the unauthorised transactions immediately.  

2. The second situation when the customer has zero liability is in the case of "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." In other words, if a third party is behind the unauthorised transaction, the customer will have zero liability if he/she reports it within three working days. 

The RBI directs all banks to "mandatorily register for SMS alerts and wherever available register for e-mail alerts, for electronic banking transactions."

The SMS alerts are to be sent "mandatorily" while email alerts may be sent, wherever registered. The lenders need to advise their customers to notify their bank of any unauthorised electronic banking transaction at the earliest after the occurrence of such transaction. The RBI said, "Longer the time taken to notify the bank, the higher will be the risk of loss to the bank/customer."

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Banks, hence, have to provide customers "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."