Online Banking Frauds – How well does the RBI cover you?


If the digital world hasn’t psyched you enough about possible online frauds while making payments or accessing your accounts online, here’s more….

Well not exactly! The RBI recently came down with a set of norms on customer liability during an online banking fraud. Is there good news? Yes. The RBI brought this move due to the surging complaints regarding unauthorized banking transactions. Here are the quick facts:


 The responsibility of proving the liability of the customer in an unauthorized transaction rests with the bank.
 Also, the liability of the customer has been pegged lower according to the current rules as to what existed earlier.
 It has also tightened the screws on banks holding them completely accountable for negligence or deficiency at their end.

For this, the RBI has classified the frauds into three types:


What is your liability in a Third party Breach?

Enjoy zero liability if you have reported the transaction within three days of its occurrence in your account. To make it simple enough, if Arjun receives an SMS alert about a 10,000/- debit on his account where he has not initiated the transaction in anyway, he will incur zero liability. Just to caution this zero liability is only when the customer is not at fault or has not been negligent about transaction access information. The reporting to the bank must happen within 3 working days.

Arjun will incur a cost if there is delay beyond this:

Within 4-7 days of reporting a third party breach
If reported within 4-7 days of receiving a communication from the bank, the liability of the amount is in full with a maximum ceiling of INR 25,000. This would however be applicable only to high value accounts.

Has the RBI been lenient to small savings account holders? Yes. The maximum liability capped for a savings account is INR 5000/- for a third party breach which is reported between 4-7 days and 10,000/- for all other type of savings accounts.

It has been capped at INR 5 lacs for all gift cards, pre-paid cards and credit cards.
Here’s the bonus. Current accounts, cash credit and overdraft accounts of all small and medium enterprises are capped at INR 10,000/- if their average annual balance is INR 25 lacs.

Beyond 7 days
The bank determine the extent of the customer’s liability with a Board approved policy which has to be communicated to the customer. The Banking Codes and Standards Board of India which capped the liability at INR 10,000/- states that the RBI’s policy supersedes any policy or norm of the BCSBI.

What’s your Liability when the Bank is negligent or involved in the Fraud?

Here’s where the RBI has cracked the whip. If the bank is involved in a contributory fraud or the unauthorized electronic transaction is due to the negligence of the bank, the bank becomes completely liable for such a fraudulent transaction. The customer carries zero liability.

What’s the liability for your negligence?
If the fraud has occurred due to no fault of yours. Eg: You have been threatened or your information has been snatched or lost due to an accident and if proved, then the liability in such cases is zero. When there has been a voluntary disclosure of information which is the cause for the unauthorized transaction then the customer becomes completely liable.

What is the time period to resolve these issues?
• In cases where the customer is found to have zero liability or limited liability, the bank has to credit the amount within 10 days from the date of notification. Further in cases where the customer has a liability or limited liability the bank has to resolve the complaint within a 90 day period or pay compensation to the customer.

As a customer you are safe in many ways and your liability is limited. An unauthorized online banking transaction is a costly mistake only when the negligence is completely from your end. Voluntary disclosure of your account information or authorizing someone to use your account on your behalf is the only factor that can get you into trouble.