Has RBI changed the rules for scam compensation?, Pg10

Key Highlights:

• The Reserve Bank of India (RBI) has introduced new rules to protect customers from fraudulent electronic banking transactions.
• These amendments update the RBI’s 2017 circular on "Limiting Liability of Customers in Unauthorised Electronic Banking Transactions".
• The new framework specifically covers scams like "digital arrests" and fraudulent theft of One-Time Passcodes (OTPs).
• Customers can claim up to 85% compensation for losses up to ₹50,000, with a maximum of ₹25,000, applicable once in a lifetime.
• The rules become effective from January 1, 2027, and require reporting to the cybercrime helpline (1930) within five days for eligibility.

Detailed Insights:

• The 2017 circular primarily held banks liable only when transactions were not authorised by customers, such as in successful hacking incidents.
• The new definition of "fraudulent electronic banking transactions (EBTs)" includes transactions executed using credentials obtained fraudulently or by the customer under coercion.
• It also encompasses EBTs not authorised by a customer due to negligence by a bank or a third-party breach.
• The timeline for customers to report a loss in cases of a third-party hack has been extended from three working days to five calendar days.
• For eligible compensation, the RBI will pay roughly three-fourths of the amount, with the customer and beneficiary banks covering the remaining half.
• Customers who ignore fraud warnings or fail to register their latest contact details with the bank may not be eligible for compensation.
• The implementation date was postponed from July 1 to January 1, 2027, and complaint settlement timelines are now set at 45-60 days.
• Dvara Research, a financial inclusion think tank, had suggested considering the vulnerability of customers, as sophisticated fraud attempts are frequent.

Key Concepts Involved:

• Fraudulent Electronic Banking Transactions (EBTs): Transactions executed by a third-party using fraudulently obtained credentials or by the customer under coercion, or unauthorised EBTs due to bank negligence/third-party breach.
• Social Engineering: Psychological manipulation of people into performing actions or divulging confidential information, often used in cyberattacks.
• Digital Arrests: A scam where fraudsters impersonate law enforcement or government officials to coerce victims into making payments.
• RBI’s 2017 circular: A previous regulatory framework that outlined customer liability limits in unauthorised electronic banking transactions.