Regulatory Alerts2026-06-24
Added · Updated
Reserve Bank of India (Local Area Banks - Responsible Business Conduct) Third Amendment Directions, 2026
These Directions amend the Reserve Bank of India (Local Area Banks - Responsible Business Conduct) Directions, 2025, to impose customer protection requirements for electronic banking transactions on Local Area Banks (LABs) effective January 1, 2027. LABs must establish policies for fraud reporting, send mandatory SMS alerts for transactions over ₹500, and adhere to strict timelines for resolving complaints, capped at 45 days for domestic and 60 days for cross-border cases. The rules define zero liability for customers in cases of bank negligence or third-party breaches reported within five days, while assigning liability to customers for losses resulting from their own negligence. Additionally, a compensation mechanism is introduced for bona fide victims of small-value fraudulent transactions, providing up to ₹25,000 or 85% of the net loss, with costs shared between the Reserve Bank, the customer's bank, and the beneficiary bank.