X

DOWNLOAD APP 1800 208 8877

Posted on: July 19, 2017

Credit Card Articles 15998 Unauthorized Transactions On Credit Card What Should You Do Home » » »

With the recent rise in credit card frauds it is but natural to wonder who is liable – you or the bank? Does
the cardholder bear the brunt of the fraud or should the banks absorb the expenses? To end this suspense,
the Reserve Bank of India (RBI) recently revised the draft guidelines on Customer Protection – Limiting
Liability of Customers in Unauthorised Electronic Banking Transactions. Let us understand how these
guidelines safeguard your interest before, during and after an unauthorized transaction.

What should you do when a fraudulent transaction is conducted on your

account?
The moment you realize a fraudulent transaction is being carried out on your account, you will have to act
swiftly:
 X

number or by visiting a bank branch.

2. Banks’ loss and fraud reporting system will immediately acknowledge your complaint and share the
registered complaint number.

When are you liable for fraudulent transaction and when not
Scenarios when you are not liable

There are two scenarios when customers are not liable:

1. When the transaction occurs due to fraud or negligence or lack of appropriate checks on the part of
bank, even if the customer fails to report it to the bank. For example, malware attacks, or large-scale
account hacks.

2. When the fraud occurs due to your negligence but you report the incident within 3 working days. For
example, loss of credit card or sharing account/card details with strangers. Also Read: What To Do if
You Send Money To Wrong Bank Account]

Scenarios when you are liable

You are liable when you delay reporting the fraudulent transaction to the bank by more than 3 working
days.

1. Delay in reporting by 4 – 7 working days: You will have to pay an amount equal to the transaction
value or as per the bank’s Board’s policy, whichever is lower. Refer Table 1 for more details. But
even in such a scenario, you are liable only for the loss occurring till the time you report the incident
to the bank. So, even if unauthorized transactions continue (which is unlikely as banks block the card
or account when informed of breach or loss), you won’t have to bear the losses.
 X

For instance, in the case of savings account, your maximum liability is Rs 5000, whereas for credit
cards (with limit > Rs 5 lakhs) the maximum liability is Rs 25,000. Refer Table 2 for details.

Another crucial aspect the RBI has touched upon is making it banks’ responsibility to prove customer
liability in the case of unauthorized electronic banking transactions. As a result, banks will have to prove
whether the fraud occurred due to customers’ negligence. Instances of customer negligence include
disclosing your card details to someone or losing your credit or debit card.

Table 1: Customer Liability during Fraudulent Transactions

Time taken to report the fraudulent Customer’s liability

transaction

Within 3 working days Zero liability

Within 4 to 7 working days Transaction amount or the amount mentioned

in Table 2, whichever is lower

Beyond 7 working days As per bank’s Board-approved policy

When you delay reporting the incident by more than 7 days, you will be liable to pay as per the bank
Board’s-approved policy (refer Table 2 for details).

Table 2: Details of Customer Liability in case of Fraudulent Transactions (By Account

Type)

Type of Account Maximum liability

Basic savings bank account Rs 5,000

All other savings bank accounts Rs 10,000

Pre-paid instruments and gift cards
Current/ Cash Credit/ Overdraft Accounts of MSMEs
Current Accounts/ Cash Credit/ Overdraft Accounts of Individuals
with annual average balance (during 365 days preceding the
incidence of fraud)/ limit up to Rs.25 lakhs
Credit cards with limit up to Rs.5 lakhs

All other Current/ Cash Credit/ Overdraft Accounts Rs 25,000

Credit cards with limit above Rs.5 lakhs

What happens after you report a fraudulent transaction

The moment you notify the bank about the unauthorized transaction, the bank representatives will
immediately block your account or card, whichever is under threat. If at all any more transactions are
 X

will have to decide on your liability according to RBI guidelines (refer tables 1 and 2 above).

Disputed Transaction

If the bank happens to dispute the transaction you have reported, the burden of proof will fall on the bank.
It will have to prove that either you acted fraudulently or shared sensitive information and were complicit
in the fraud. In such a scenario, if the bank dismisses your complaint or responds dissatisfactory manner,
you can approach the banking ombudsman. After a proper investigation, the ombudsman will announce its
ruling. If you are not happy with this ruling, you can reach out to the appellate authority, headed by the
deputy governor of RBI, within 30 days of the said ruling. Post this, the only option is to approach High
Court.

When will the fraudulent transaction be reversed?

If you notify the bank within 3 days of the unauthorized transaction, your liability is zero. So, the bank
will have to credit the amount within 10 working days from the date of notification. However, if there is a
delay in reporting the fraud, the bank may follow the liability rules as laid out in the above tables or might
waive off your liability.

RBI Guidelines for Banks on How to Protect Customers Against

Unauthorized Transactions
The Reserve Bank of India has come up with a two-part approach to dealing with such frauds. Part One
includes advisory and awareness campaigns. Herein banks will have to constantly advise customers on
how to protect themselves from electronic banking and payments related fraud. This information can be
shared via emails, SMSes and interactive voice response (IVR). Part Two will include setting up of
processes and mechanisms by banks to prevent and detect frauds. Banks will have to set up:

1. systems and procedures to ensure safe and secure electronic banking transactions, including
transactions conducted at or via ATMs, POS, banks’ mobile app and net banking

2. robust fraud detection and prevention mechanisms so that banks become aware of malware attacks or
hacking at the earliest and are able to take swift action

3. processes to assess the risks that can arise from unauthorized transactions and the liabilities resulting
from such events

4. measures to reduce risks and protect themselves (i.e., banks) against potential liabilities

5. grievance redressal platform where customers can file complain regarding unauthorized account
breach or transactions.

How do banks ensure secure transactions?

Mandatory Registering for SMS Alerts: The only way to do ensure authorized transactions are carried
out is to notify customers every time there is a transaction on their account, whether savings account or
credit card. Banks will have to make it compulsory for customers to register for SMS alerts and even
e-mail alerts (wherever necessary) for electronic banking transactions. So, whenever a transaction will
 X

If, however, customers do not wish to share their mobile numbers, RBI has directed banks to not offer the
facility of electronic transactions, except ATM cash withdrawals, to these customers.

What are unauthorized or fraudulent transactions?

Unauthorized transactions can occur via numerous methods, such as phishing, hacking, and skimming.
Let’s take a look some of the most common ways unauthorized transactions are carried out:

1. Cards intercepted during transit: This happens when you open a new account or get a new credit
card. Suppose you opened a new savings account on 10th July and received your welcome kit (i.e.
cheque book, debit card, IPin) on 15th July. Now, if during this time you notice any activity
happening in your account, it will be the bank’s liability not yours.

2. Skimming: This happens when the information in your card’s magnetic strip is copied by inserting it
in an electronic device. This data is used to create a counterfeit card using your card’s details to make
purchases.

3. Phishing: These are email traps, where you receive mails from people supposedly working at banks
or government agencies and asking for confidential details pertaining to your account or credit card.
Most of these emails direct you to bogus sites and prompt you to share account-related information

4. Account Takeover: This happens when you unknowingly share your personal information, such as
address, date of birth, account number, card number and expiry date, with a stranger, who can use it
to make online purchases.

5. Loss of debit or credit card: If you happen to lose your card, chances are it may land up in the
hands of a fraudster who can use it to conduct transactions till the time you report it lost and get it
blocked.

6. Card-not-present (CNP) fraud: Here, the fraudster would use your card number and expiry date to
conduct a transaction over phone or mail. In such cases, the card need not be present physically and
card verification code (CVV) may not be required, making it easy for the fraudster.

Also read: 2-minute to Credit Card Fraud

Tips to Conduct Online Transactions Safely

Given the amount of time we spent in front of a computer screen, it’s important to follow some simple
steps to ensure all our financial transactions, such as netbanking and online bookings and purchases, are
secure. Take a look:

1. Anti-virus software: Always use a licensed and latest version of anti-virus software to ensure
complete protection against malware, phishing and Trojans.

2. Auto-update all software: Web browser companies regularly update their software by periodically
releasing patches or version updates. It can be difficult to keep up with these updates manually, so it’s
better to activate the auto-update option for all software installed in your computer.
 X

with anyone.

4. Avoid using public computers: When conducting financial transactions, avoid using public
computers, such as those present in internet cafes. Most of these systems do not have requisite anti-
virus software, thus compromising your account security.

5. Conduct online purchases with reputed companies or merchants: When making purchases
online, it is important to ensure that the merchant’s website is secure. One of the ways to ensure is
checking whether the site is “https” and if there is lock symbol before the site’s name in the address
bar. A lot of small merchants do not implement tough security mechanisms, making customers
vulnerable to data breach.

Tips to Conduct Mobile Transactions Safely

With the advent of banks’ mobile apps and wallets, such as PayTM and Freecharge, it has become all the
more important to ensure that you follow “safe” mobile banking habits. Here are a few ways that can help
you have a safe mobile banking experience without compromising on your financial security:

1. Be cautious: Don’t store your account details, such as PINs and account number, on your mobile
phone. And, if you happen to use a banking app or a mobile wallet, don’t activate the automatic login
feature. By ensuring these habits, your accounts will be safe even if you lose your mobile.

2. Avoid making transactions on public networks: While free Wi-fi hotspots are a big hit, they aren’t
the safest platforms for conducting transactions. Always use your mobile service provider or Wi-fi
connection that is password protected.

3. Use official apps: With the internet teeming with banking apps and wallets, it’s important that you
download only the official versions of these apps. Using unofficial apps makes you susceptible to
data breach or mobile hacking as these apps’ data security features may be too lax or already
compromised.

4. Avoid spam mails and messages: If you happen to check your mails on the go, it’s best to avoid
 X

text.

5. Use social media wisely: While a lot of people share absolute details about their life voluntarily on
social media, it is better to exercise restraint when it comes to financial information. Also, avoid
clicking on suspicious posts that may lead you to third-party sites and solicit confidential personal
information.

6. Be careful when answering calls from unknown numbers: Nowadays, a lot of scammers call up
people and ask for account or card details on the pretext that your account has been blocked or
deactivated and that these callers will help recover it. Do not divulge your account information as this
is just another way of getting their hands on your sensitive financial information.

To sum up, here’s what you should do to avoid incurring losses caused by an unauthorized transaction:

1. Register your mobile number and email id with your bank for notifications

2. Inform the bank immediately in case of loss of card or account hacking or any fraudulent transaction

3. Get your account or card blocked to prevent any further loss

4. Keep a record of all your correspondence with the bank officials, whether telephonic or via mail

5. Follow up with the bank with respect to action or steps taken after your notification

6. Monitor your account whether any more transactions are being conducted

7. Contact banking ombudsman if you are not satisfied with the bank’s resolution

What to Expect from your Credit Top 6 Credit Cards That Offer
Card’s Travel Insurance Amazing Cashback
X
X
 X
What is Personal Loan?

COMPANY LOANS CARDS LEARN FINANCIAL TOOLS

About Us Personal Loan Credit Card Learn EMI Calculator

Contact Us Home Loan Debit Card Articles Personal Loan EMI
Terms of Use Loan Against Property News Calculator
OTHERS
Disclaimer HL Balance Transfer Infographics Home Loan EMI Calculator
Privacy Policy Education Loan Income Tax FAQs Loan Against Property EMI
Intellectual Policy Gold Loan Money Transfer Banks & Financial Calculator
Company FAQs Business Loan Saving Schemes Institutions Education Loan EMI
Awards Two wheeler Loan Credit Score Calculator
ACCOUNTS
Media Wallet Car Loan EMI Calculator
MUTUAL FUNDS
Newsletter Savings Account Gold Rate Gold Loan EMI Calculator
Sitemap Fixed Deposit Silver Rate What are Mutual Funds Loan Eligibility Calculator
PolicyBazaar Compound Interest Calculator
FD Calculator
RD Calculator

Retirement Planning

Calculator

Our Investors :

© Copyright 2010-2017 Paisabazaar.com. All Rights Reserved.Comparison of loan products is undertaken by PaisaBazaar Marketing and Consulting Pvt. Ltd.