NPCI unveils norms for banks to compensate AePS fraud victims – The Economic Times

Clipped from: https://economictimes.indiatimes.com/industry/banking/finance/banking/npci-unveils-norms-for-banks-to-compensate-aeps-fraud-victims/articleshow/86213579.cms?utm_source=ETTopNews&utm_medium=HPTN&utm_campaign=AL1&utm_content=23Synopsis

During the course of the Covid-19 pandemic, several cases of fraud were reported in Jharkhand and Tamil Nadu in the direct benefit transfers (DBT) where government welfare funds meant for underprivileged beneficiaries were allegedly siphoned off using the AePS.

The National Payments Corporation of India (NPCI) has introduced detailed guidelines for banks to redress frauds perpetrated on customers and merchants where a misuse or an error in biometric data or UIDAI seeding on Aadhaar Enabled Payment System (AePS) have led to a loss of funds.

As per AePS fraud liability guidelines, introduced formally from September 1, NPCI has issued new rules for acquiring and issuing banks on responsibilities to deal with such fraudulent transactions that cause monetary losses for customers and to reimburse them.

During the course of the Covid-19 pandemic, several cases of fraud were reported in Jharkhand and Tamil Nadu in the direct benefit transfers (DBT) where government welfare funds meant for underprivileged beneficiaries were allegedly siphoned off using the AePS.

ET has seen a copy of the enabling circular issued to all banks. The guidelines have been in the making for over two years. NPCI and AePS member banks agreed in February 2019 to formalize such a standard. The final decision to implement the fraud liability guidelines were taken in an NPCI steering committee meeting in July 2021.

The issuing bank must notify within five days when a customer registers a complaint along with an investigation report. NPCI will then give the acquirer bank 10 days to make their submission where they will have to contend that the liability of fraud is not at their end, the circular said.

If the acquirer is unable to do so, the new NPCI guideline mandates the bank to reimburse the customer within three days. The submission of the acquirer bank will be scrutinised by the issuer bank too, the circular said.

The bank that acquired the merchant or whose device has been used is the acquirer bank. The issuer is the bank in which the user holds her deposit and links Aadhaar AePS transactions. These guidelines are applicable for all financial transactions – cash withdrawal, deposit, fund transfer, involving business correspondents (BC) or customer service points (CSPs) on AePS network.

“These guidelines will have a multi-pronged benefit, one is that it brings more discipline to the entire process as the onus is on the acquirer bank, so we will have to put in tighter fraud control mechanisms,” said Anand Kumar Bajaj, the chief executive of Pay Nearby, a leading fintech facilitating AePS transactions.

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