Have you thought about the financial burden that would result if your credit card went missing or was stolen and ended up in the hands of a fraudster before you blocked it? You may wonder if the bank would assist you in reverting the unauthorised transactions or if you, as the cardholder, will be responsible for the loss.
Credit cardholders should remember that if their card is stolen, they may stop it from being misused by reporting the fraud to the respective bank as soon as possible, but subject to certain rules prescribed by the Reserve Bank of India (RBI).
RBI’s rules distinguish liability based on whether the unauthorised transaction involves the bank, a third-party breach, or the customer.
Here’s what cardholders need to know about who pays when a stolen credit card is used and when the bank must refund the money.
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Credit card fraud: Who bears the loss?
RBI’s rules distinguish liability based on whether the unauthorised transaction involves the bank, a third-party breach or the customer.
| Summary of Customer’s Liability | |
| Time taken to report the fraudulent transaction from the date of receiving the communication | Customer’s liability |
| Within 3 working days | Zero liability |
| Within 4 to 7 working days | The transaction value or the amount whichever is lower |
| Beyond 7 working days | As per bank’s Board approved policy |
Source: RBI
Where the transaction is linked to the bank irrespective of whether or not the transaction is reported by the customer, the customer has zero liability regardless of when it is reported.
A customer’s right to zero liability will also apply in the event of a third-party breach in which the deficiency occurs elsewhere in the system rather than with the bank or the customer, and the customer informs the bank of the unauthorised transaction within three working days of receiving notification from the bank.
If reported within four to seven working days, the customer’s liability is subject to the limits prescribed by RBI.
Beyond seven working days, the applicable liability shall be determined by the bank’s board-approved policy.
“Banks shall provide the details of their policy in regard to customers’ liability formulated in pursuance of these directions at the time of opening the accounts. Banks shall also display their approved policy in public domain for wider dissemination. The existing customers must also be individually informed about the bank’s policy,” RBI says.
A full refund applies where the customer has zero liability under the applicable RBI framework.
When a customer’s irresponsibility results in a loss, such as when he discloses payment credentials, the customer will be responsible for the whole loss until he notifies the bank of the unauthorized transaction. The bank will be responsible for any loss that arises after the unauthorised transaction is reported.
“For a transaction made before you report the card lost or stolen, liability depends on the circumstances and when it is reported. Reporting within three working days can mean zero liability. Once the card or transaction is reported, any subsequent loss is borne by the bank,” said Adhil Shetty, CEO, BankBazaar.
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Maximum liability of a customer
The RBI states that the customer’s liability for each transaction is capped at the transaction value or the amount shown in the table below, whichever is lower.
| Type of Account | Maximum liability in Rs |
| BSBD Accounts | 5,000 |
| All other SB accounts | 10,000 |
| Pre-paid Payment Instruments and Gift Cards | |
| Current/ Cash Credit/ Overdraft Accounts of MSMEs | |
| Current Accounts/ Cash Credit/ Overdraft Accounts of Individuals with annual average balance (during 365 days preceding the incidence of fraud)/ limit up to Rs.25 lakh | |
| Credit cards with limit up to Rs.5 lakh | |
| All other Current/ Cash Credit/ Overdraft Accounts | 25,000 |
| Credit cards with limit above Rs.5 lakh |
Source: RBI
“The use of an OTP, PIN or CVV by itself does not establish your liability. Under RBI’s framework, the bank has to establish customer liability. Retain transaction alerts, statements, complaint acknowledgements and relevant communications. You can also ask the bank for transaction and authentication details supporting its claim,” said Shetty.
Zero/limited liability: Know the reversal timeline
As per RBI, within ten working days of the customer’s request, the bank shall credit the amount involved in the unauthorised electronic transaction to the customer’s account (without waiting for the settlement of any insurance claims, if applicable).
“Banks may also at their discretion decide to waive off any customer liability in case of unauthorised electronic banking transactions, even in cases of customer negligence. The credit shall be value dated to be as of the date of the unauthorised transaction,” RBI has clarified.
According to RBI, further, banks shall ensure that:
The bank must resolve the complaint and determine the customer’s liability, if any, within the timeframe specified in its Board-approved policy. However, this period cannot exceed 90 days from the date the complaint is received. The customer must also be compensated, wherever applicable.
If the bank is unable to resolve the complaint or determine the customer’s liability, if any, within 90 days, compensation will be provided as prescribed by the RBI.
In the case of a debit card or bank account, the customer does not lose any interest on the affected amount. Similarly, in the case of a credit card, the customer does not incur any additional interest burden.
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What to do after a card fraud?
First, raise a written complaint with your card issuer and retain the acknowledgement or reference number. If there’s no response within the applicable period or the response is unsatisfactory, you can approach the RBI Ombudsman. Keep transaction details, alerts, statements, complaint records, and the bank’s response.
To prevent your credit card from being stolen, keep your card secure and avoid leaving it unattended. Enable transaction alerts and check statements regularly. If your card is lost or stolen, report it immediately through the issuer’s 24×7 channels. RBI requires issuers to block the card immediately once informed. Never share your PIN, CVV, or OTP.
Disclaimer: This article is for informational purposes only and should not be construed as investment, financial, tax, or legal advice. Any illustrations, examples, or return projections used in this article are for explanatory purposes only and do not guarantee actual investment outcomes. The views and opinions expressed by experts quoted in this article are their own and should not be considered investment recommendations. Readers should consult a qualified professional before making any financial decisions.
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