Unauthorised Transactions in your Bank Account: Limits on Your Liability

The Reserve Bank of India has issued various guidelines for the Banks to protect customers’ interests in case of unauthorized electronic transactions.

The guidelines cover many topics, including strengthening systems and procedures, reporting unauthorised transactions, and others.

This article focuses on the rules for determining customer liability.

1. Full Liability: If the loss is due to negligence by the customer, such as sharing of payment credentials, the customer will bear the entire loss until the transaction is reported. Losses that occur after the reporting are the bank’s responsibility.

2. Zero Liability:

i. Contributory fraud/ negligence/ deficiency on the part of the bank

ii. When neither the bank nor the customer is at fault and the customer notifies the bank within three working days.

3. Limited Liability: When neither the bank nor the customer is at fault and:

i. Customer reports the transaction within four to seven working days: Maximum per transaction liability of the customer will be lower of the transaction amount and below limits:

• BSBD Accounts — ₹5,000
• All other SB accounts, Pre-paid Payment Instruments and Gift Cards, Current/ Cash Credit/ Overdraft Accounts of MSMEs, Current Accounts/ Cash Credit/ Overdraft Accounts of Individuals with annual average balance (for 365 days preceding the incidence of fraud)/ limit up to Rs.25 lakh, Credit cards with limit up to Rs.5 lakh — ₹10,000
• All other Current/ Cash Credit/ Overdraft Accounts, Credit cards with a limit above Rs.5 lakh — ₹25,000

ii. Customer reports the transaction beyond seven working days: Every bank must prepare a Board approved policy to determine customer’s liability in such cases.

Important Points

• The burden of proving customer liability in case of unauthorised electronic banking transactions shall lie on the bank.
• The number of working days is based on the customer’s home branch’s schedule, excluding the date of receipt of the communication.

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