Continuation of auto debit facility may expose customers to risk of frauds: Experts

The decision by Reserve Bank of India to allow auto-debit facility from credit and debit cards might result in more frauds, banking sources admitted on Wednesday and said that cyber frauds were becoming a menace.

An officer of a PSU bank who is not authorised to speak to the press pointed out that cyber frauds are a growing menace in the country and it would have suited the common man if the restrictions could have been put in place as announced earlier.

“In March last year MoS finance Anurag Thakur outlined the menace in Lok Sabha and revealed that between October and December 2019, a total of Rs 129 crore was lost in frauds related to credit cards, debit cards and Internet banking,” said the officer.

In India in FY19 only there were more than 50,000 cases of credit and debit card frauds involving a sum of about Rs 150 crore.

On Wednesday afternoon, in a sternly worded statement RBI said that the auto debit facilities would continue till September and blamed the banks for not being able to put in necessary systems in place to restrict the practice to safeguard the interest of the customers.

However, a top functionary of a banking employees association remarked that merely withdrawing the auto debit facility will not make any serious dent on banking frauds that are regularly committed in the country.

“The decision was taken by RBI in response to the inadequacies of the system and the inability to put the system in place. It is true that the step was designed to check online frauds. But even after this step, frauds will continue,” said Rajen Nagar, president of All India Bank Employees’ Association.

He pointed out that RBI annual report of 2019-20 said that amount involved in banking frauds grew from Rs 71,500 crore in 2018-19 to Rs 1.85 lakh crore in 2019-20. The number of frauds rose from 6,799 in 2018-19 to 8,707 the next year.

The frauds were mostly in the loan category both by number and value, pointed out Nagar.

“The primary objective of the framework was to protect customers from fraudulent transactions and enhance customer convenience. Based on a request from Indian Banks’ Association (IBA) for an extension of time till March 31, 2021, to enable the banks to complete the migration, Reserve Bank had advised the stakeholders in December 2020 to migrate to the framework by March 31, 2021. Thus, adequate time was given to the stakeholders to comply with the framework,” RBI said in a statement on Wednesday.

It was earlier announced that in the new system effective from April 1, Additional Factor Authentication would need banks to send a notification to customers five days before the scheduled payment.

The transaction will only take place after approval from the customer. This is needed for all transactions, however the small the amount is.

If the amount is more than Rs 5,000, banks also need to send a one-time-password for carrying out the payment.