RBI Announces Proposal to Compensate Fraud Victims Up to Rs 25,000

The Reserve Bank of India (RBI) Governor Sanjay Malhotra proposed to introduce a new system under which the customers who have incurred losses due to small-value fraud transactions would be compensated up to Rs 25,000.

This framework for compensation in small-value fraud transactions will soon be issued for public feedback and suggestions.

As per Malhotra, the Apex Bank will release three draft guidelines related to mis-selling, loan recovery and recovery agent engagement, and restricting customer liability in unauthorized electronic banking transactions.

The governor highlighted that when the financial products and services are sold inappropriately, it can cause serious problems for both the customer and the companies. Considering this, he emphasized a need to make sure that the third-party products sold at bank counters match the needs of the customers and are according to their risk profile.

He also said that RBI will publish a discussion paper on the possible steps to improve the safety of the digital payments. These steps include lagged credits and extra authentication for specific categories of individuals like senior citizens.

The guidelines on restricting the liability of customers in unauthorized electronic banking transactions were released in 2017. These provide zero liability if the bank is negligent or if the fraud is reported within three working days.

The RBI Governor added that currently, different rules apply to various types of regulated entities (REs) for engaging recovery agents and conducting the related aspects of loan recovery.

The RBI has now decided to review and harmonize these rules. The governor mentioned that a draft of the new guidelines will be shared soon for public feedback.