The Reserve Bank of India (RBI) on Wednesday announced its plans to introduce the concept of limited liability for prepaid instruments, such as digital wallets, smart cards, and online accounts.
Limited liability guarantees users that if they lose money through an unauthorised transaction such as a third-party hack, the extent of liability will be limited, even zero if they inform the bank immediately. Until now limited liability was only applicable on credit/debit cards. With RBI’s latest announcement this safety net will be extended to prepaid payment instruments as well.
However, according to the banks, the liability limits for e-wallets is likely to be lower, considering the smaller transaction size and lower balances.
RBI also said that it will set up an ombudsman for digital transactions to address grievances related to prepaid instruments from individuals.
RBI deputy governor, M K Jain, said that for promoting the level of trust, a dedicated and empowered grievance redressal system is a prerequisite, therefore the ombudsman would be funded by the RBI and will be a cost-free and expeditious platform for individuals.
The new rules will further ensure that users of digital wallets can complain to the banking ombudsman if they have any dispute with the bank. At present, around 20% of all complaints received by the RBI pertain to either debit or credit cards.
“It will cover all entities falling within RBI’s jurisdiction, which means non-banks as well,” said Jain.
The development comes soon after RBI allowed the interoperability of prepaid payment instruments (PPIs) and issued norms for the same.
According to the rules, the Unified Payments Interface (UPI) will be an essential means for wallet-to-wallet money transfer, and it will be the National Payments Corporation of India (NPCI) that will further look into the related policy and guidelines to smoothen the process.
The introduction of limited liability will add a layer of safety to digital payments and promote a more mature fintech ecosystem in India.
[The development was reported by ET.]