An improved code forces banks to be more careful about technology-related frauds on their customers, for which banks are unaccountable now

The year promises to begin on a better note for bank customers. A report in the Economic Times (ET) says that the revised code of services by the Banking Codes and Standards Board of India (BCSBI) is going to be significantly pro-consumer and move towards a better balance of rights and obligations between banks and their customers. According to the ET report, there are two main changes. First, when it comes to electronic fraud, the onus of proving that the customer participated in the fraud or compromised the user ID and password will shift to the bank. While the details of the changes prescribed by BCSBI are not known, these changes were recommended by the Damodaran committee on customer services way back in 2011.  

Its report had said that Internet banking should be so designed that it would make consumers feel that electronic transactions are safe. And that there should be “a secure total protection policy/zero-liability against loss for any customer induced transaction, utilising technology through ATMs (automated teller machines)/PoS (point of sales)/online banking, etc. A customer should not be made to be out of funds when any loss is suffered on account of Net (Internet)/ATM banking transactions.”

In fact, the committee recommended that banks should allow customers to put in various checks to prevent fraudulent transfers. These could include, restricting transfers abroad unless specified and restricting transfers above a certain value. More recently, at a meeting of nodal officers and banking ombudsmen, Dr KC Chakrabarty deputy governor of the Reserve Bank of India (RBI) had emphatically said that banks cannot push the burden of proof on the customer and, if they could not find suitable insurance cover to mitigate their risk, they may want to reconsider offering Internet banking at all. “Nobody forced you to offer Net Banking,” he said.

The committee recommended tiered security for the safety of mobile transactions which have already been introduced by almost 50 banks. These include—cap on transaction value, destination of transaction (two-level authorisation for non-routine destinations), security based on handsets and the frequency of payments. More importantly, it had said that grievances about mobile banking should be dealt by banks without hassling the customer by referring the matter to the service-provider.

A frequent complaint is about ATMs failing to dispense cash. RBI already requires complaints to be resolved within seven days and the money credited back to the account, failing which the customer is entitled to a compensation of Rs100 per day of delay. RBI’s customer services department is now following up on the Damodaran committee’s recommendation that a small camera should be trained on cash being dispensed into a bin. But banks have been resisting the move on the grounds of the high.

A revised BCSBI code is certainly a big move forward, but customers must remember that the code will not protect customers who fall for phishing or vishing attacks on the pretext of account verification or succumb to the lure of a fake lottery or prize.

Another change in the BCSBI code is that banks will have to drop the quid-pro-quo deals with third-party products on customers, usually borrowers. These would include insurance tie-ups with car dealers, especially when there is a loan involved or making a specific insurance mandatory on mortgage loans.

This is again a small step forward in the large fight that Moneylife has been waging about stopping banks from selling third-party products altogether. We believe it is a strange travesty that banks take advantage of their fiduciary role of keeping deposits safe and, instead, push customers to withdraw funds to buy toxic and expensive insurance and investments, to earn commissions for themselves. But this is a global battle which will require persistent effort by bank customers around the world.