Prelims: Current events of national and international importance | Economy
Why in News?
The Reserve Bank of India (RBI) has introduced an amendment to its landmark 2017 circular on "Limiting Liability of Customers in Unauthorised Electronic Banking Transactions".
- New Framework - It introduces a targeted mechanism to reimburse retail customers who fall victim to sophisticated digital frauds, while clearly defining the boundaries of customer negligence.
- Timeline - The new rules will be implemented as a 1-year pilot project effective from January 1, 2027.
- It also follows an extension from the originally proposed July 1 draft date to allow banks sufficient implementation time.
- Shift from the 2017 Framework - Under the 2017 guidelines, banks were held liable to compensate customers primarily if the transactions were completely unauthorized by the user.
- Fraudulent Electronic Banking Transactions (EBTs) - The RBI defines these as transactions executed by a third-party using credentials obtained from the customer through fraudulent means, or executed by the customer under explicit coercion or duress.
- Included Scams
- Digital Arrests - Where victims are psychologically coerced by fraudsters posing as law enforcement into transferring funds.
- Fraudulent OTP Theft - Where one-time passcodes are deceptively stolen from the customer.
- The Guardrail of Customer Negligence - Customers who actively ignore explicit, automated fraud signal warnings such as real-time alerts displayed on a UPI PIN screen indicating a potential scam will not be eligible for compensation.
- Contact Information Mandate - Failure to update and register the latest mobile number or email address with the bank automatically constitutes customer negligence, as it prevents the delivery of critical automated fraud alerts.
- Reporting Window- For third-party breaches, the timeline for a customer to report a loss has been increased to 5 calendar days (up from the previous standard of three working days).
- Compensation Mechanism - The framework strictly applies to losses up to Rs.50,000.
- Scams involving losses above Rs.50,000 are completely excluded from this specific pilot framework.
- Individual victims can claim 85% of the lost amount, subject to a strict lifetime cap of Rs.25,000 per customer.
- Consequently, for any scam amount ranging between Rs. 29,412 and Rs. 50,000, the customer will receive a flat, capped compensation of Rs. 25,000.
- Approximately 3/4th (75%) of the compensation amount is funded directly by the RBI, customer's bank and the beneficiary bank (where the stolen funds landed) equally share the remaining 25% of the payout.
- Settlement Timelines - The institutional complaint settlement timeline has been extended to 45 to 60 days (with the upper 60-day limit reserved specifically for cross-border or international electronic transactions).
Reference
The Hindu | RBI’s digital scam compensation pilot
