Cyber scammed? RBI plans compensation up to Rs 25,000

MUMBAI: The RBI is proposing to compensate customers for losses arising from small-value digital frauds, with payouts of up to Rs 25,000, as part of a broader overhaul of consumer protection rules amid rising risks from mis-selling, cyber fraud and aggressive loan recovery practices. The e-fraud compensation will be for 85% of the loss amount or Rs 25,000 whichever is less and will be a once-in-lifetime benefit for those who have lost money including those who have shared one-time passwords.

Governor Sanjay Malhotra said the central bank has reviewed its 2017 framework on limiting customer liability in unauthorised electronic banking transactions, citing rapid technological adoption in banking and payments since then.

“Accordingly, the draft revised instructions, including a framework for compensation in case of small value fraudulent transactions, shall be issued shortly for public consultation,” he said.

Malhotra said that ideally customers should learn from the mistakes of others but in the case of first-time victims, RBI has decided to compensate 70% of the amount with the balance 30% of the loss being equally borne by the bank and customer.

Alongside digital frauds, RBI is tightening norms to curb mis-selling of financial products by regulated entities. Malhotra said mis-selling has “significant consequences for both customers as well as the regulated entity.” “There is a felt need to ensure that third-party products and services that are being sold at the bank counters are suitable to customer needs and are commensurate with the risk appetite of individual clients,” he said.

To address this, the RBI plans to issue comprehensive instructions covering advertising, marketing and sales of financial products and services. “The draft instructions in this regard shall be issued shortly for public consultation,” the governor said.

The central bank will also review and harmonise rules governing loan recovery and the engagement of recovery agents, an area that has drawn frequent customer complaints. At present, different categories of regulated entities follow different conduct-related instructions. “It has now been decided to review and harmonise all the extant conduct-related instructions on engagement of recovery agents and other aspects related to recovery of loans,” Malhotra said, adding that draft norms will be released for public feedback.