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Do Banks Share Liability for Online Banking Frauds? Is Refund Possible?

January 08, 2018

Online banking has many benefits. You can transfer money instantly without going to a bank, check the history of transactions, and access a variety of banking products. However, with the increased use of these services, related frauds have also become quite prevalent.

Online banking

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The Reserve Bank of India took note of the online frauds in time and created the necessary guidelines to help prevent the occurrence of these and protect the interest of the customers. However, it recently provided specific provisions in terms of how much liability the banks share, and how much can a customer expect to get in a refund in an event of a fraud.
Full Refund
You can claim a full refund of a fraud related to ATM transactions or any online banking service, etc. if you meet the following two conditions:

  • If the fraud took place because of the negligence of the bank. An example of this is if the fraudster is able to withdraw funds from online banking account of the customer without having to enter an OTP. In such an event, the bank has to refund the full amount to the customer even if the customer didn’t inform the bank about the incident.
  • If the liability of the fraud lies with a third-party, i.e. when neither the bank nor the customer is responsible. In this case, the bank has to provide a full refund on the condition that the customer notifies the bank about the fraud within 3 working days.
    Partial Refund

If a breach has occurred and the customer informs the bank within 4 to 7 working days, then the then customer liability is limited to the amount of the transaction, or a fixed amount depending on the type of banking service it is, whichever is less. For instance, the fixed amount for savings bank account is Rs 10,000 for a savings bank account, and Rs. 25,000 for overdraft accounts and currency accounts, etc.

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