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RBI limits customer liability in fraudulent PPI transactions

Issuer to bear loss that occurs after transaction is reported

The Reserve Bank of India has decided to limit the liability of customers in case of unauthorised electronic payment transactions in Prepaid Payment Instruments (PPIs) issued by non-banks.
Under new norms on customer liability, the regulator said frauds due to third-party breach where neither the customer nor the PPI issuer is at fault, there cannot be any liability for the customer, in case the incident in reported within three days.
If the fraud is reported between three and seven days, customer liability will amount to the transaction value or ₹10,000, whichever is lower.
For over seven days, the liability of the customer will be according to the board-approved policy of the PPI issuer.
After the customer reports the fraud, the PPI issuer has to credit the amount involved in the unauthorised transaction to the customer’s PPI within 10 days.

Proof of liability

“The burden of proving customer liability in case of unauthorised electronic payment transactions shall lie on the PPI issuer,” RBI said. There will be no liability to the customer if fraud is due to negligence or deficiency of the PPI issuer, irrespective of whether or not the transaction is reported by the customer.
“In cases where the loss is due to negligence by a customer, such as where he / she has shared the payment credentials, the customer will bear the entire loss until he / she reports the unauthorised transaction to the PPI issuer. Any loss occurring after the reporting of the unauthorised transaction shall be borne by the PPI issuer,” the RBI said.

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