RBI Moves to Strengthen Customer Protection in Digital Payments
The Reserve Bank Governor Sanjay Malhotra on Friday announced a proposed framework to compensate bank customers up to Rs 25,000 for losses arising from small-value fraudulent transactions. The announcement was made while unveiling the last bi-monthly monetary policy of the current financial year.The proposed compensation framework forms part of a broader effort by the Reserve Bank of India to enhance consumer protection amid the rapid adoption of digital banking and payment systems across the country.
Discussion Paper Planned on Digital Payment Safety
As part of the policy measures, the central bank will release a discussion paper outlining possible steps to improve the safety of digital payments. These measures may include lagged credits and additional authentication requirements for specific categories of users, including senior citizens.The RBI Governor said the central bank is also preparing to issue three separate draft guidelines aimed at strengthening customer safeguards. These relate to mis-selling of financial products, recovery of loans and the engagement of recovery agents, and limiting customer liability in unauthorised electronic banking transactions.
Revised Rules on Liability in Unauthorised Transactions
The existing instructions governing customer liability in unauthorised electronic banking transactions were issued in 2017. These rules specify scenarios and timelines for zero or limited liability for customers.Given the significant technological advancements in banking and payment systems since then, the RBI has reviewed the current framework. The revised draft instructions will include a compensation mechanism for small-value fraudulent transactions and will be released shortly for public consultation.
New Focus on Mis-Selling and Recovery Practices
The central bank highlighted concerns around mis-selling of financial products and services by regulated entities, noting that such practices have serious implications for both customers and institutions.To address this, comprehensive draft instructions will be issued covering advertising, marketing, and sales of financial products and services. The aim is to ensure that third-party products sold at bank counters are suitable for customers and aligned with their individual risk profiles.
In addition, the RBI will review and harmonise existing guidelines related to the engagement of recovery agents and conduct during loan recovery, as different categories of regulated entities currently follow separate sets of instructions.
Mission SAKSHAM Announced for Urban Cooperative Banks
Alongside regulatory measures, the RBI Governor announced Mission SAKSHAM, a capacity-building initiative for Urban Cooperative Banks. The programme focuses on strengthening skills, technical capabilities, and operational resilience within the sector.The initiative aims to train around 1.40 lakh participants through physical training programmes and a scalable digital learning platform. Training sessions will be conducted as close as possible to participating banks, with content delivered in regional languages wherever feasible.
The mission will be implemented in collaboration with the umbrella organisation of Urban Cooperative Banks and national and state-level federations.
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