eGovWatch: RBI to check customer liability in bank frauds; framework on the anvil

Mundra also cautioned on Jan Dhan accounts, saying they are “very vulnerable” to frauds and asked banks to be on guard against misuse of accounts for money muling.

The Reserve Bank of India (RBI) is examining the possibility of issuing regulatory directions on limiting the liability of customers on fraudulent transactions arising out of cards and electronic banking deals.

RBI deputy governor SS Mundra on Monday warned banks against misuse of Jan Dhan accounts for money muling purposes, mis-selling of products, excessive service charges and non-functioning of almost one-third of ATMs across the country.

He said the discussion centred on fixing the limit the liability and a framework will be announced soon. “We are discussing this and once we finalise, the limit will be announced. We expect to finalise it very shortly,” Mundra said. “As online transactions have increased so have the rise in complaints related to electronic banking transactions. Complaints related to unauthorised fund transfers, fraudulent withdrawals from ATMs using duplicate cards, phishing e-mails aimed at extracting personal information etc. have witnessed manifold increase,” he said.

“It is imperative to have a robust mechanism to prevent incidents of fraud in areas of mobile/net banking and electronic fund transfer so as to retain customers’ confidence,” he said at a function of Banking Codes and Standards Board of India.

Mundra also cautioned on Jan Dhan accounts, saying they are “very vulnerable” to frauds and asked banks to be on guard against misuse of accounts for money muling. “In a recent episode, it was observed that an idle account buy Viagra 100mg online was used for receiving and transferring large funds without the knowledge of the account holder. The fact came to light only when the income tax authorities served a notice on the account holder. This episode highlights the failure of bank’s systems and processes,” he said.

Mundra also warned banks about the mis-selling of products. “There has been increasingly large number of cases of mis-selling of third party products, particularly insurance products to the customers by the banks by bundling them with loans,” he said.

The RBI has undertaken study on mis-selling of third party products (TPPs) in semi-urban and rural areas. “The Right to Suitability enshrined in our Charter of Customer Rights has been totally ignored or rather knowingly violated for the reasons best known to the banks. The RBI is seized of this issue and may be constrained to take strict actions including imposition of heavy penalties, if the banking industry continues to follow such unethical and unacceptable practices,” Mundra warned.

Mundra also expressed concern over levying of excessive charges for various services. “While RBI does not wish to micromanage the banks’ affairs, the imposition of usurious and uncalled for charges certainly invokes our attention. Despite our guidelines on non-imposition of charges for non-maintenance of minimum balance in a savings bank account, we have been receiving certain complaints of such practices. It is in this context that we had to reiterate our instructions on stopping imposition of such charges leading to a negative balance in savings accounts,” he said.