RBI to Introduce Limited Liability, for Prepaid Instruments such as digital wallets, smart cards, and online accounts.
What does it mean?
- Limited liability guarantees users that they lose money through an unauthorized 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 however, now onwards prepaid Instruments such as digital wallets, smart cards, and online accounts will be covered.
- However, according to the banks, the liability limits for e-wallets is likely to be lower, considering the smaller transaction size and lower balances.
- Last year, the central bank had introduced the concept of ‘zero liability’ for card users. Under this policy, cardholders who lost money due to a third-party breach and who reported the loss within three days would get all their money back.
- RBI will set up an ombudsman for digital transactions to address grievances related to prepaid instruments from individuals.
- Ombudsman would be funded by the RBI and will be a cost-free and expeditious platform for individuals.
- The introduction of limited liability will add a layer of safety to digital payments and promote a more mature finance ecosystem in India.
- It will help Government’s endeavors to promote a less-cash society