Understanding RBI Guidelines: Liability and Protection for Customers

In a troubling trend, the financial losses due to cyber fraud in India have surged dramatically, more than doubling from Rs 69.68 crore in the fiscal year 2023 to a staggering Rs 177.05 crore in FY24. Minister of State for Finance, Pankaj Chaudhary, shared these alarming figures in a written reply to the Lok Sabha, highlighting the increasing threat of cybercrime in the country.

Steep Increase in Fraudulent Losses

The fiscal year 2023-24 witnessed a significant spike in losses due to fraud involving credit cards, debit cards, and internet banking. This sharp rise is part of a worrying trend observed over the past few years:

• FY24: Rs 177.05 crore
• FY23: Rs 69.68 crore
• FY22: Rs 80.33 crore
• FY21: Rs 50.10 crore
• FY20: Rs 44.22 crore

Understanding the Liability and Protection

The Reserve Bank of India (RBI) has established guidelines to protect customers from bearing the full brunt of unauthorized transactions. However, the extent of protection depends largely on how quickly the customer reports the fraud:

• Immediate Reporting (Within 3 Working Days): If a customer reports an unauthorized transaction within three working days and the fault lies with the bank or elsewhere in the system, the customer bears no financial loss.
• Reporting Between 4 to 7 Working Days: The customer’s liability can range from Rs 5,000 to Rs 25,000, depending on the type of account.
• Reporting Beyond 7 Working Days: The customer’s liability is determined by the bank’s internal policy.

Proving Customer Negligence

The onus of proving negligence lies with the bank. Minister Chaudhary emphasized, “The burden of proving customer liability in case of unauthorised electronic banking transactions shall lie on the bank.” This means that unless the bank can conclusively demonstrate that the customer was negligent, the customer should not be held fully liable for the losses.

Protecting Yourself from Cyber Fraud

To safeguard against such losses, customers should follow these best practices:

1. Regular Monitoring: Frequently check your bank statements and transaction history for any unauthorized activity.
2. Prompt Reporting: Immediately report any suspicious transactions to your bank to minimize potential losses.
3. Secure Practices: Use strong, unique passwords for banking services and enable multi-factor authentication whenever possible.
4. Stay Informed: Keep abreast of the latest cyber fraud tactics and remain vigilant against phishing attempts and other scams.

The dramatic increase in financial losses due to cyber fraud highlights the urgent need for enhanced security measures and greater awareness among customers. While the RBI’s guidelines offer some protection, the responsibility to act swiftly and stay informed remains crucial for every individual. By following best practices and promptly reporting any suspicious activity, customers can better protect themselves against the ever-growing threat of cybercrime.

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