Zero liability for customers in case of lender negligence: RBI, Pg16

Key Highlights:

• RBI proposes zero liability for customers in fraudulent digital transactions due to lender negligence.
• Lenders must reverse unauthorized transactions if fraud is linked to their lapses.
• Proposed norms apply to transactions on or after July 1, 2026, once finalized.
• Customers may receive compensation for fraudulent transactions up to Rs 50,000.

Detailed Insights:

• The draft guidelines mandate that banks compensate customers for losses due to their negligence, irrespective of whether the customer reported the transaction.
• Negligence includes failure to implement security systems, not sending transaction alerts, system malfunctions, security breaches, or internal frauds.
• Compensation, either 85% of the net loss or Rs 25,000 (whichever is lower), is provided as a one-time measure if the loss is proven bona fide.
• Victims must report fraudulent transactions to the National Cyber Crime Reporting Portal or helpline (1930) and the bank within five days to be eligible for compensation.

Key Concepts Involved:

• Digital Transaction: Any financial transaction occurring through electronic or online means.
• Lender Negligence: Failure of a bank to implement mandated security measures for digital transactions.
• Zero Liability: A situation where a customer is not responsible for losses incurred due to fraudulent transactions.