Beyond Zero Liability: Re-Examining Customer Protection And Bank Accountability For Cyber Fraud Under The RBI’s 2017 Framework And Its 2026 Reforms
Kairavi Jain, Symbiosis Law School, Pune, Symbiosis International (Deemed University), India
ABSTRACT
India's rapid migration onto digital payment rails has been matched, almost step for step, by the growth of cyber-enabled financial fraud, leaving courts, regulators and consumer forums to work out who bears the loss when a transaction is authenticated by a machine but never truly authorised by the account holder. This paper revisits the liability architecture created by the Reserve Bank of India's circular of 6 July 2017 on Customer Protection - Limited Liability of Customers in Unauthorised Electronic Banking Transactions, and asks whether its promise of tiered, fault-based liability has produced consistent outcomes in practice. Drawing on a doctrinal reading of the Circular alongside the conflicting Single Judge and Division Bench rulings in the Hare Ram Singh litigation, Supreme Court authority restricting consumer fora from adjudicating fraud-tainted claims, and the developing practice of the RBI's Integrated Ombudsman Scheme, the paper identifies a structural mismatch: a regime that formally shifts the evidentiary burden onto banks, operating inside forums that either lack the technical capacity to test that burden or decline jurisdiction the moment fraud is alleged. The paper also situates this doctrinal gap against the Reserve Bank's March 2026 draft revision, which proposes a compensation mechanism for small-value unauthorised transactions, and against parallel institutional measures such as MuleHunter.AI and the newly incorporated Indian Digital Payment Intelligence Corporation. It closes with proposals for a rebuttable presumption of bank liability, a standing technical-assessor mechanism within consumer fora, and mandatory forensic audit trails.
Keywords: Unauthorised electronic transactions, zero liability, RBI Circular 2017, cyber fraud, Banking Ombudsman, Consumer Protection Act, deficiency in service, mule accounts.
