DIGITAL PAYMENTS FRAUD: ARE RBI GUIDELINES ENOUGH FOR CONSUMERS?

Author: Rama Singh, Chaudhary Charan Singh University, Meerut

INTRODUCTION

In India, there is a sudden growth of digital payments or digital transactions, which made transactions easier for the citizens instead of carrying loads of cash. Earlier, when there was no concept of online payments, the people always had a constant fear of misplacing cash. So digital payments have made it easy for citizens to do transactions. But whenever we have seen the development in technology there were always some drawbacks along with it. Likewise in digital payment we have seen many digital frauds that have occured many times with many people. And now it has become a common incident not only in India but also in many countries. Cyberattacks, fraud calls and fake sms have become a part time job of the fraudsters. And anyone who is not well known to working of digital system becomes a prey for fraudsters. There is some lack of awareness among people about the fraud calls and fraud sms they get. Sometimes, the consumer gets so many messages only for a single transaction which creates confusion for consumers. To ensure the smooth functioning of digital banking the RBI guidelines and frameworks are available which should be followed by both the consumers and all banking sectors.

ROLE OF RESERVE BANK OF INDIA

There are many financial institutions that make sure that the digital transactions work smoothly without any defaults. On the basis of RBI guidelines, there is no liability on the consumers if the fraud occurred due to the negligence of the bank. But the liability of the consumer arises when the consumer does something carelessly and does not report within the 3 working days. It is the duty of these financial institutions to give access to the helpline platform 24 x 7 for consumers to file online complaints. The institution must always provide SMS and emails for each transaction. There should be strict KYC norms for all wallets and payment apps. All banks have their cybersecurity frameworks. The frameworks and guidelines should be strong enough to beat the speed of fraud activities happening on a daily basis.

ARE RBI GUIDELINES ENOUGH?

CRITICAL ANALYSIS

a) There are some strengths of the RBI guidelines, which help consumers to make themselves aware of such frauds. The clear liability framework of the RBI encourages and boosts the confidence of consumers.

b) Now many financial institutions are working to improve their services while providing alert SMS and emails and also improving the helpline platform, which also helps to detect fraud more efficiently.

c) There is a new initiative taken by the RBI about the ‘two-factor authentication’ while doing transactions, which is a great initiative to reduce the defaults and fraud activities. This initiative is stronger in India than in many other countries.

d) The consumers have zero knowledge about their own liabilities and that of the bank. Most of the time banks deny claims and say that the loss happened due to the negligence of consumers. Fraudsters often adopt different and new techniques, due to which the guidelines and frameworks are lagging behind.

e) There is a burden on consumers, as they are required to report in a timely manner (within 3 working days), which is somehow difficult for rural people and elderly people.

JUDICIAL PERSPECTIVE

The judiciary also plays a good role when these financial institutions fail to perform their duties and when there is no clear redressal of disputes. Whenever there is an increase in frauds more than the frameworks and guidelines, the judiciary takes relevant steps to ensure that these frameworks work efficiently.

In case of ICICI bank v. Shanti Devi, 2008, the bank was held liable for not providing the secure system. As there were unauthorized transactions happening in her account without his knowledge. Even the ombudsman was in favor of the consumer, but the implementation was very slow. The court emphasized the court performing their duty of care instead of blaming consumers.

In another case of Suresh Chandra Singh Negi & Anr. v. Bank of Baroda & Ors. (2025), The petitioner alleged that some amount of money had been transferred from their father’s account to the account of a third party. They claimed that the transaction was against their will and unauthorized. The Allahabad High Court held that the burden of proof lies with the bank to prove the customer’s liability and that the unauthorized transactions happened through electronic banking.

HEARING AND THE POLICY CONCERNS

In the recent hearing of a parliamentary committee the reports of experts have flagged digital frauds as a challenge for consumer protection. The Standing Committee on finance (2022) has noted that there is an increase in the UPI – related scams and gave more emphasis to improve the grievance redressal. In the year 2024-25, there were 36,37,288 incidents of digital payment fraud. The National Crime Record Bureau (NCRB) shows that around 60% of all cybercrimes have been reported as financial frauds. The Ministry of Electronics and Information Technology has also highlighted that most of the complaints that have been recorded in the cybercrime portal were based on online banking and digital payments. This represents the weakness of the frameworks and guidelines provided by the RBI. It shows that there are many guidelines to protect the consumers, but they are not strong enough as compared to the activities of the fraudsters.

GROUND REALITIES FOR CONSUMERS

The consumers are not literate enough about the digital sector. Sometimes the consumers who don’t know the trap of fraudsters do as the fraudsters say to them, by which it becomes easy for fraudsters to do scams. Many times the consumers reuse their PIN in many other banking apps, which helps the fraudsters to achieve their targets. There is one more issue called ‘Digital Fatigue’ in which the consumers SMSs, OTPs, and emails about their transactions. However many consumers ignore the suspicious messages and falls into the trap of fraudulent activity. In short, it shows least alertness of consumer towards such messages.

Another ground reality is that the consumers fail to get proper support for digital transactions. For example, in rural areas the people are dependent upon their neighbors who have knowledge of the digital transactions because they aren't accustomed to the usage of such applications. There is another issue where the fraudsters try to attract the consumers through social media, identifying themselves as some shopping site, so that they can get the details of the consumer’s banking credentials.

The last reality is the inconsistency in the dispute resolution system that adds to the problem for the consumer’s protection. Even if the consumers file a complaint in a small or fintech company, the staff is so untrained about the investigation process that it creates difficulty for the consumers. Likewise, the high-value corporates who have the best knowledge of all procedures also perform delays in providing compensation to the consumers.

RECOMMENDATIONS AND REFORMS

To strengthen the policies and frameworks of the RBI and other banks, the policies must go beyond the existing circulars. The banks should get penalized if they deny providing the claims to the consumers. There should be effective awareness campaigns in which the consumers should get aware about their rights of ‘zero liability’ and safe digital practices.

The reporting window (which is 3 working days) should be extended because it becomes difficult for the rural people and elderly citizens to reach and complain within 3 days. The guidelines must be updated to cover the activities of the fraudsters. Lastly, there should be a collaboration between the RBI, small fintech, and high-value companies that can ensure stronger authorities and can practice fast fraud detection.

CONCLUSION

By creating a liability measure and ensuring the strong security frameworks, the RBI guidelines form an important foundation. However, the RBI is not enough on their own; they need other authorities to collaborate with them to make strong authorities that can deal with the fraud activities more efficiently. Weak processes and lack of implementation reduce their effectiveness. A balanced approach in all authorities is needed where they can strengthen the regulations and penalize those banks that are negligent. The rules should be updated with the development of technology in the banking sector. There should be a mixture of technical, educational, and legal aspects that can ensure real protection for consumers in this digital world.

The consumers beyond the financial loss face the stress, anxiety, and depression that lead to serious health problems. The guidelines should be framed, which reduces both financial and emotional harm. There should be the framing and implementation of a mechanism that helps the rural, illiterate, and elderly citizens only. The consumer faces confusion as different banking apps have different types of features, so a uniform feature can reduce their confusion.