- RBI mandates a 5-day provisional credit for card fraud.
- New framework enhances customer safety in digital transactions.
- Banks must send instant SMS alerts for transactions over Rs 500.
In a move that could bring major relief and add a layer of safety against financial fraud for credit card users, the Reserve Bank of India (RBI) said that a bank should provide a shadow reversal or provisional credit of the disputed amount in case of complaints of fraudulent electronic banking transactions via a credit card within 5 days from the date of customer notification.
Under the new revised framework, issued by the RBI on limiting customer liability in digital transactions, a bank should design its systems and procedures to make customers feel safe conducting electronic banking transactions (EBT).
According to the framework, there should be appropriate measures in place to ensure the safety and security of EBTs.
"A bank shall mandatorily send instant SMS alerts to its customers for all EBTs of value more than Rs 500. For EBTs of value up to Rs 500, a bank may decide to send instant SMS as per its internal policy but without any charge to the customer," the RBI said.
When Will the New Framework Be Effective
These rules will come into effect from January 1, 2027. Additionally, the bank's communication systems used to send alerts and receive responses will record the date and time the message was received and the customer's response, if any.
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RBI said that on receiving complaints from customers about any fraudulent EBTs, banks should take immediate steps to prevent further unauthorised EBTs in the customer's account.
"A customer shall be entitled to zero liability and reversal of the transaction in cases where the fraudulent EBT occurs due to negligence/deficiency on the part of the bank, irrespective of whether the transaction is reported by the customer or not," it said.
Zero Liability And Reversal
Additionally, in the event of a third-party breach, customers should be entitled to “zero liability and transaction reversal” if they report an unauthorised fraudulent EBT to the bank within five calendar days of the occurrence.
If a third-party breach is reported to the bank after five calendar days, the customer’s liability will be determined according to bank policy.
In March, the Central Bank proposed expanding the scope of existing guidance to limit customer liability for unauthorised EBT through draft guidance.
It also proposed to cover other categories of fraudulent EBT, reduce the time banks take to process complaints related to fraudulent EBT, and introduce an indemnity mechanism for low-value fraudulent transactions.
The RBI stated that the feedback received on the draft guidelines has been examined, and the resulting changes have been appropriately incorporated in the final revised guidelines.
In cases where a bank is required to reverse fraudulent EBTs, it must ensure that the reversal value is as of the original date and that the customer does not incur any loss of interest or additional interest/charges, as applicable.
Some stakeholders suggested including a provision for shadow reversal in case of fraudulent EBTs on credit cards, which the RBI adopted.
"In case of a complaint arising out of fraudulent EBTs in a credit card, a bank shall provide a shadow reversal equivalent to the amount involved in the fraudulent EBTs within five calendar days from the date of receipt of notification from the customer, " RBI said.