Limiting Customer Liability In Unauthorised Electronic Banking Transactions In India
Keeping in mind the increasing numbers of cyber frauds in India, the Reserve Bank of India (RBI) issued one special circular on July 6, 2017. The circular reiterated the framework for limiting customer liability in cases of unauthorised electronic banking transactions by including clauses for zero and limited liability. The customer will not be held responsible for any loss or damages arising from unauthorised electronic banking transactions in case the same is reported to the bank within 3-4 days of the unauthorized transactions.
The new rule was implemented in the year 2017 and applies to both the customer and the bank. The Reserve Bank of India announced that the liability of customers for unauthorised electronic banking transactions is zero if they report the incident within three days of the incident provided there is no negligence on the part of the customer. Also, the bank’s negligence or contributory fraud are deemed to be sufficient grounds for a customer to be liability-free for unauthorised transactions.
Limiting customer liability in unauthorised electronic banking transactions is a crucial step for both banks and customers. The new rule makes it possible for the bank to compensate the customer for the loss of an unauthorised transaction, even if it is not the bank’s fault. It also provides banks with a means to limit their liability if it’s the customer’s fault, but they are required to decide the claim within 90 working days after initially giving the credit withing 10 days of the reporting.
You can contact our team of cyberlaw consultants to learn more about this cyber security law.
Prevents Financial Exploitation
The new rule aims to prevent any financial exploitation of customers and limit bank liabilities. It also seeks to limit the scope of unauthorised transactions. The new rules clarify that banks will not be held liable for any unauthorised electronic banking transactions if the customer is responsible. But the law also states that the bank should reimburse a customer if the unauthorised electronic banking transaction causes them damage.
The RBI also stated that the customer would be liable if found responsible for the unauthorised transactions. In other words, the bank cannot be held accountable for a customer’s losses if the customer was negligent or delayed informing the bank. However, the rule states that the bank must pay the customer’s losses if it is unable to provide proof of the alleged unauthorised electronic banking transaction. So, these regulations on loss liability have also shifted the burden of proof to the bank from the customer.
Extends Safety to Digital Wallets
The RBI has decided to extend this safety net to digital wallets and unauthorised electronic banking transactions in a similar move to limit cyber frauds in India. The new regulations require banks to credit the customer’s account within ten working days after the incident. However, the customer must be aware of the terms and conditions in order to avoid any legal disputes. This will help customers make informed decisions.
The bank must prove its liability to ensure that the customer is not disadvantaged. They are also needed to identify the fault with a careful cybercrime investigation in India and compensate the customer according to guidelines within 90 days. If a bank fails to meet these regulations, it must provide total compensation within a reasonable time frame.
The new rules have also made an impact on customers’ rights and are considered a great step towards building a unified cyber security law for online banking/payment frauds in the country. The customer has to inform the bank in writing within three days in such a case. Then, the bank must pay any damages incurred due to the unauthorised electronic banking transaction. At the same time, a bank is not legally responsible for the losses that occurred due to unauthorised electronic banking transactions if the customer does not report them in the stipulated time frame.