The Reserve Bank of India has amended its Responsible Business Conduct Directions for urban co-operative banks, replacing the existing customer liability framework for unauthorised electronic banking transactions with a broader customer protection regime for fraudulent electronic banking transactions. For transactions undertaken on or after Jan. 1, 2027, the revised rules set out when customers have zero liability, place the burden on banks to prove customer liability, require faster complaint handling and transaction reversals, and introduce a limited compensation mechanism for certain small-value fraud losses even where customer negligence is involved. Urban co-operative banks must adopt and publish a policy covering customer rights and obligations, complaint resolution timelines, reporting channels and fraud awareness. The framework adds detailed definitions for electronic banking transactions, fraudulent transactions, customer and bank negligence, third-party breaches and shadow reversals. Banks must verify customer mobile numbers and email addresses, send instant SMS alerts for all electronic banking transactions above INR 500 and email alerts where available, maintain 24x7 reporting channels, acknowledge complaints immediately and act at once to prevent further unauthorised transactions. Customers are entitled to zero liability where fraud results from bank negligence regardless of when it is reported, and for third-party breaches if reported within five calendar days. Losses after reporting must be borne by the bank. Complaints must be resolved within the bank's policy timeline, subject to a maximum of 45 calendar days for domestic cases and 60 calendar days for cross-border cases. Required reversals must be value dated to the original transaction date, and fraudulent credit card transactions must receive a shadow reversal within five calendar days of notification. The amendment also creates a one-time compensation mechanism for bona fide individual customers, including sole proprietors, who suffer gross losses of up to INR 50000 in cases falling under customer negligence and report both to the bank and the National Cyber Crime Reporting Portal or helpline within five calendar days. Compensation is set at 85% of net loss or INR 25000, whichever is lower, with the cost shared between the Reserve Bank of India, the customer's bank and, for domestic cases, the beneficiary bank. The compensation mechanism applies to losses from fraudulent electronic banking transactions occurring up to one year from the effective date, and banks must report such complaints periodically to their board or a designated committee.

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