Whalesbook
Consumer Protection Overhaul
The Reserve Bank of India is charting a new course for consumer protection, with a significant proposal to compensate victims of small-value digital frauds. The central bank aims to offer payouts of up to Rs 25,000, covering 85% of the loss amount or the cap, whichever is less. This benefit is planned as a one-time offer for customers who have lost money due to digital malfeasance, including those who shared sensitive information like one-time passwords.
Governor Sanjay Malhotra highlighted that the RBI has reviewed its 2017 framework on limiting customer liability for unauthorized electronic transactions, acknowledging the swift technological evolution in banking and payments. Draft revised instructions, featuring this compensation framework, are slated for public consultation shortly. For first-time victims, Malhotra indicated a balanced approach where the RBI would cover 70% of the loss, with the remaining 30% equally shared by the bank and the customer.
Tackling Mis-selling and Recovery Practices
Beyond digital fraud, the RBI is also tightening norms to combat the mis-selling of financial products by regulated entities. Governor Malhotra emphasized the 'significant consequences' of mis-selling for both customers and institutions, underscoring the need to ensure third-party products sold at bank counters are suitable for customer needs and aligned with their risk appetite. Comprehensive instructions covering advertising, marketing, and sales of financial products are expected soon for public feedback.
Furthermore, the central bank will harmonize rules governing loan recovery and the engagement of recovery agents. This initiative stems from frequent customer complaints and aims to create uniform conduct-related instructions across different categories of regulated entities. Draft norms detailing these harmonized practices will also be released for public comment.