What changed
RBI amended the SFB Responsible Business Conduct Directions, 2025, inserting definitions for Card Not Present, Card Present, electronic banking transaction, fraudulent EBT, customer negligence, SFB negligence, shadow reversal, third-party breach, and unauthorised EBT. These apply to transactions from January 1, 2027.
What it means for you
SFBs must clearly define customer and bank negligence in unauthorised transactions, impacting liability determination. The shadow reversal provision requires provisional credit for fraudulent EBTs, affecting cash flow and operational processes. Banks need to align systems and training with these new definitions.
What you must do
- Update internal policies and customer agreements to reflect new definitions of negligence and fraudulent EBT.
- Implement systems for shadow reversal (provisional credit) for reported fraudulent transactions.
- Enhance 24x7 reporting channels and mandatory alerts for electronic banking transactions.
- Train staff on distinguishing customer vs. bank negligence per the amended directions.
- Review and update authentication mechanisms for card-present and card-not-present transactions.
Who it affects
Small Finance Banks (SFBs), SFB customers using electronic banking transactions, SFB compliance and risk management teams, Digital payments and card operations departments
What is the effective date for these amended directions?
The directions apply to electronic banking transactions undertaken by customers on or after January 1, 2027.
What does 'shadow reversal' mean in this context?
Shadow reversal is the temporary or provisional credit of the amount involved in a fraudulent electronic banking transaction, as defined in the amended directions.
How is customer negligence defined under the new rules?
Customer negligence includes failing to safeguard credentials, not promptly reporting fraud or lost cards, ignoring bank scam warnings, downloading malicious apps, or not updating contact details with the bank.