SMS Alerts Could Limit Liability of Customers in Bank Frauds

A major chunk of the SMS’s received by an average smartphone user account for advertisements and transaction alerts messages by bank. These messages are usually not paid much attention by the users but could now act as tools to avoid losses against bank fraud. The customer could now use these alerts while reporting to banks about unauthorised activity on their account.

RBI Announces Revised Guidelines

The revised guidelines on ‘Limiting Liability of Customers in Unauthorised Electronic Banking Transactions’,  issued this Thursday by the Reserve Bank of India (RBI) call for ‘limited liability’ and ‘zero liability’ for bank customers in case of online as well as face-to-face transactions involving payment via electronic methods in stores. Additionally, to effectively enforce this directive, RBI has mandated all banks to register their customers for text message alerts and ensure linking of mobile numbers with bank accounts.

These guidelines have come in response to the current upwelling in customer grievances relating to unaccounted debits in their accounts. If the customer notifies the bank within 3 days of the unauthorised transaction taking place, then the concerned amount will be credited to the account of the customer within 10 working days. This ‘Zero liability’ will only be applicable once it has been when it has been established that the neither the customer nor the bank are responsible for the transaction but it from outside the system.

Similarly, if the customer reports the unauthorised transaction after 4 to 7 days, then he may be required to pay a penalty of either Rs.5,000 or Rs.10,000 or Rs.25,000 based on the nature of the bank account and card.

Bank Channels For Grievance Redressal

RBI has also asked the banks to ensure that customers have sufficient channels to report such frauds and unauthorised transactions, which should include an option of allowing customers to report fraudulent activity on the bank’s homepage. Other channels through which the customer could report unauthorised activity should include SMS, email, phone banking, interactive voice response and call centres.

In the interest of customers it has been provisioned that a customer  is entitled to ‘Zero liability’, if the unauthorised transactions happen due to negligence, fraud or deficiency on the part of the bank. In this case, it is not mandatory for the customer to report the unauthorised transaction.