6 key steps RBI has taken to ensure safe banking practices. Details here

Digital banking has brought a paradigm shift to the way we carry out financial transactions. The collateral damage, however, is the spate of frauds that accompany it. To minimise these frauds, the banking regulator has taken a number of steps so that banking remains safe and secure.

Deputy governor of Reserve Bank of India (RBI) Swaminathan J. highlighted some of these steps in a speech delivered recently in Paris. 

Here, we summarise some of the points he underscored that stand to benefit depositors and investors alike. 

These are the six steps that are meant to benefit investors:

1. Multi factor authentication: All banks are supposed to implement multi-factor authentication for all payments through electronic modes and fund  transfers barring some explicitly small value transactions. 

Out of these authentication methods, at least one of them should be generally dynamic or non-replicable such as one time password, mobile device binding or biometric etc.

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2 Risk assessment: Banks are also meant to conduct risk assessment of the safety of digital payment products as well as suitability and appropriateness of  the same. They are also meant to identify suspicious transaction behaviour and mechanisms in place to alert customers.

3. Zero liability for customers: To protect customers, regulations provide for zero liability for customers for losses due to  negligence by the bank or a third-party breach.

And where it is due to customer negligence, the liability is limited to the point of reporting.

4. Digital lending guidelines: Additionally, RBI has issued guidelines on digital lending which require regulated entities to provide a key fact statement to the borrower before the execution of the contract.

5. Supervisory framework: Regulatory requirements are backed by a supervisory framework that evaluates business conduct and IT systems controls. The banking regulator also takes appropriate supervisory actions including imposition of business restrictions. 

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6. Cyber-crime reporting portal: The government also set up a National Cyber Crime Reporting Portal with round-the-clock helpline to allow victims of cyber fraud to report such crimes.

However, despite all these efforts, the instances of phishing and unauthorised transactions are not uncommon.

Therefore, the RBI makes several efforts to foster a culture of financial prudence and resilience through customer awareness and education campaigns. 

The RBI recently also organised 'Financial Literacy Week' targeting young adults particularly students. 

The goal was to raise awareness on the advantages of inculcating financial discipline from an early age with inputs on saving, power of compounding, banking essentials and cyber hygiene.