“As long as (the customers) are defrauded whether on their own accord or anyone else’s accord, no questions asked… we will compensate them as long as it is unintended,”Reserve Bank Governor Sanjay Malhotra
MUMBAI: Amid growing digital fraud, the Reserve Bank on Thursday said that banking customers will receive compensation of up to Rs 25,000 for a fraudulent transaction.
A customer will be paid the compensation even in cases where the customer ends up sharing the one-time password (OTP) with the fraudsters, Reserve Bank Governor Sanjay Malhotra told reporters here.
The money will be paid to the bank customers from the Rs 85,000-crore Depositor Education and Awareness Fund, central bank officials said, making it clear that a customer can get compensation only once in a lifetime and provided that no malafide intent is found.
The plan comes against the backdrop of a surge in frauds amid growing penetration of digital payments in the world’s most populous country.
“As long as (the customers) are defrauded whether on their own accord or anyone else’s accord, no questions asked… we will compensate them as long as it is unintended,” Malhotra said in the post-policy press conference.
Even though their overall value is low, two-thirds of the digital frauds are under Rs 50,000 in amount, the RBI brass said, stressing that a bulk of the fraud-hit people stand to benefit from the facility.
“As long as they are defrauded, whether on their own accord or anyone’s accord, no questions asked, Rs 25,000 will be paid. We will compensate them as long as it (the transaction) is unintended and they have lost the money,” Malhotra said.
He added that it is important to have customers’ “skin in the game”, and 15 per cent of the fraud amount will have to be borne by the account holder even if the fraud is under the Rs 25,000 limit. In cases of high-value fraud, the compensation will be capped at Rs 25,000.
“The amount is very small (for us), but for small customers… this is a way of providing some immediate relief and solace,” Malhotra said.
A draft of the compensation framework will be issued soon for public consultation, Malhotra said.
“The amount is very small (for us), but for small customers… this is a way of providing some immediate relief and solace,” Malhotra said.
According to Malhotra, the RBI will issue three draft guidelines covering-Mis-selling of financial products, Recovery of loans and engagement of recovery agents,Limiting customer liability in unauthorised electronic banking transactions.
Additionally, the RBI will publish a discussion paper on measures to enhance the safety of digital payments. These may include lagged credits and additional authentication for specific user groups, such as senior citizens.
Deputy Governor Swaminathan J said that the money will be paid out of the DEA Fund, which also includes deposits which are unclaimed for over 10 years.
“It is that particular segment, which unwittingly becomes a victim of such frauds, is what we are trying to cover. So, the financial impact (of compensating) may not be very high,” he added.
Separately, Deputy Governor Shirish Murmu said that an awareness campaign asking depositors to reclaim their deposits has helped increase the run rate of the deposits to about Rs 5,000 crore per year now.
Malhotra also announced that the RBI will be coming up with additional safety tools to prevent fraud, such as having lagged credit to beneficiary accounts and also additional authentication to ensure that senior citizens are not duped by unsuspecting people.
Nearly 65% of the frauds reported by banks involve losses of less than Rs 50,000, Malhotra said.
Detailed rules have not been issued.