Thursday, 3 October 2013

Banks to Pay Penalty for Fraudulent Card Swipe Transactions at Unsecure POS Terminals

Reserve Bank of India has on September 27, 2013 issued a circular fixing responsibilty of banks as part of Security and Risk Mitigation Measures for Fraudulent Card Present Transactions, i.e. card swipe transactions at merchant establishments. In order to make such transactions secure, Reserve Bank of India had earlier mandated the task of securing the technology infrastructure (Unique Key Per Terminal- UKPT or Derived Unique Key Per Transaction- DUKPT/ Terminal Line Encryption- TLE) as stated under Para 4(a)(3) of RBI circular DPSS.PD.CO.No.513 / 02.14.003 /2011-2012 dated September 22, 2011. As per the new circular, the card holder/s would be approaching his/her card issuing bank for any fraudulent POS transaction/s in India (which have occurred after September 30, 2013), and the issuing bank would ascertain, within 3 working days from the date of cardholder approaching the bank, whether the respective POS terminal/s where the said transaction/s occurred is/are compliant with TLE and UKPT/DUKPT as mandated. In the event it is found that the POS terminals are non-compliant as mandated, the issuing bank shall pay the disputed amount to the customer within 7 working days, failing which a compensation of Rs.100 per day will be payable to the customer from the 8th working day. Read more below...

The issuing bank shall claim the amount paid by it to the customer from the respective bank/s which have acquired the POS transaction/s in question. The acquiring banks have to pay the amount paid by the issuing bank without demur within 3 working days of the issuing bank raising the claim, failing which the Reserve Bank of India would be constrained to compensate the issuing bank by debiting the account of the acquiring bank maintained with the Bank.

This is fine, though I will be a little skeptical on the Rs. 100 per day penalty. Why, because Reserve Bank of India had earlier prescribed a similar penalty of Rs. 100 per day for delayed refund of failed ATM transactions and then instructed Banking Ombudsman offices in India not to issue orders in favour of bank customers based on the RBI circular. Read complete details in this article: Rs. 100 per day penalty for delayed refund of failed ATM transactions.

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All information given in this blog is obtained from sources in the public domain, RTI applications, discussions with bankers, bank customers in India and also with some employees of Reserve Bank of India having knowledge of the working of various Offices of Banking Ombudsman in India. All information in this blog is presented on a best effort basis and is not claimed to be complete information on any of the subjects covered in this blog. Use of any information given in this blog is purely voluntary on the part of the readers. Author of this blog does not assume any responsibility for any action of the readers related to any matter discussed in this blog or any consequences thereof. Readers of this blog are advised to consult a legal practitioner before taking any action related to any matter discussed in this blog.