What changed
RBI issued the Reserve Bank of India (Rural Co-operative Banks - Responsible Business Conduct) Third Amendment Directions, 2026, adding definitions for Card Not Present, Card Present, Electronic Banking Transaction, Fraudulent EBT, customer negligence, RCB negligence, and shadow reversal. These apply to transactions on or after January 1, 2027.
What it means for you
RCBs must now clearly distinguish between card-present and card-not-present transactions for liability purposes. The new negligence definitions shift accountability: if a customer fails to report fraud promptly or ignores bank warnings, liability may rest with them; if the bank lacks systems or alerts, liability falls on the bank. Shadow reversal (provisional credit) is introduced for disputed transactions.
What you must do
- Update internal policies and customer terms to incorporate new definitions and liability rules by January 1, 2027.
- Ensure 24x7 channels for reporting fraudulent EBTs and loss of cards are operational.
- Implement mandatory transaction alerts and clear warnings for suspected scam transactions.
- Train staff on new negligence criteria to assess customer vs. bank liability accurately.
- Prepare systems for shadow reversal (provisional credit) processing for disputed EBTs.
Who it affects
Rural Co-operative Banks (RCBs), RCB customers using electronic banking transactions, RCB compliance and risk management teams, Digital payment and card service providers to RCBs
When do these new directions take effect?
They apply to electronic banking transactions undertaken by RCB customers on or after January 1, 2027.
What is 'shadow reversal' as defined in the amendment?
Shadow reversal means the temporary or provisional credit of the amount involved in fraudulent EBT(s), provided by an RCB to a customer on receipt of notification, before completion of investigation or settlement.
Does this amendment change the existing 2025 Directions?
Yes, it modifies the Reserve Bank of India (Rural Co-operative Banks – Responsible Business Conduct) Directions, 2025 by inserting new definitions and provisions.