The Reserve Bank of India on Monday indicated that it would like to bring in a system under which a credit card holder is not liable for transactions done fraudulently using his card.
Speaking at a the launch of the mobile banking facilities of Tamilnad Mercantile Bank, Mr G. Padmanabhan, Executive Director, RBI, posed a question as to whether it the time was not ripe “to implement a zero liability policy”.
While leaving it to the industry to debate and discuss the issue, Mr Padmanabhan compared the situation as obtains in India and the developed world, and noted that countries such as the US have adopted a ‘zero liability policy'. However, in India, the liability is on the customers.
Generally the credit card issuers are not liable for fraudulent transactions unless the customer reports the unauthorised transactions immediately. So the shift in liability from customers to banks comes into effect only after the customer informs the bank.
Banks argue that they take adequate steps to ensure safety of card transactions, and the least they expect from the customer is to report the card loss immediately.
While “this is understandable and logical” a consequence of this is that if a customer has adhered to all the risk measures prescribed by the bank, but yet unauthorised transactions have taken place in his account, “should the responsibility then not be with the card issuing bank?”
Mobile banking
Observing the huge mobile phone penetration in India, which is more than the penetration of banking services, Mr Padmanabhan asked if it was not time for banks to embrace mobile banking.
Giving a data-point, he said that in October 2011, 22.45 lakh transactions worth Rs 161 crore happened over mobile phones. Close to 10 million customers have registered themselves for mobile banking. Yet, these numbers are “a drop in the ocean,” Mr Padmanabhan said.
“What this means is that banks have not really made a significant penetration even amongst their existing customers to extend mobile banking services,” he said.
Mr Padmanabhan said that often questions such as ‘who owns the customer?' and ‘who controls the transaction' keep cropping up.
“Has there been any worthwhile attempt to resolve them in a mature way? Or like sulking infants, is each one trying to wear out the other, including the regulator?
“Let me say that if the latter is true, it can be a painfully long and expensive process benefiting none and does not help in our efforts to achieve true financial inclusion,” he said, assuring everyone that RBI was committed to the success of mobile banking.