RBI Guidelines Every Indian Should Know: Customer Liability, KYC, Digital Lending, Deposit Insurance, Ombudsman and Loan Rules

The Reserve Bank of India (RBI) regulates banks, non-banking finance companies (NBFCs), payment systems and credit information companies. Its directions give you rights that many customers never use. This guide summarises the rules that matter most for everyday banking and borrowing. Rules are updated frequently, so check RBI's website and your bank's notices for the latest versions.

This is general information, not legal, tax or financial advice. Laws, limits and procedures change, and your facts matter. Verify with official sources and consult a qualified lawyer, chartered accountant or adviser before acting.

1. Limited liability for unauthorised electronic transactions

RBI's customer protection framework limits your liability when someone makes an unauthorised electronic transaction from your account:

• Zero liability if the fraud is due to the bank's or system's negligence, or a third-party breach where neither you nor the bank is at fault, and you report within three working days of receiving the alert.
• Limited liability (capped by the account type and a transaction value) if you report within four to seven working days in cases where the fault is not with the bank.
• Bank policy-based liability beyond seven days.
• If you are negligent, for instance by sharing credentials, you may bear the loss until you report it to the bank.

Banks must credit the amount within 10 working days (shadow reversal) once a customer reports, subject to the framework, and settle the claim within 90 days. Always report immediately and keep proof. Read more in digital payment safety and UPI guide.

2. KYC and account rules

• Banks must verify identity and address under the Master Direction on KYC. Officially valid documents include Aadhaar, passport, driving licence, voter ID and others.
• Video KYC and Aadhaar e-KYC are allowed under conditions. Banks may ask for periodic KYC updates. Failure to update can lead to restrictions.
• Basic savings bank deposit accounts (BSBDA) have no minimum balance but limited features.
• Banks cannot refuse to open accounts for those meeting norms without reasons. See banking basics.

3. Deposit insurance (DICGC)

Deposits are insured up to ₹5 lakh per depositor per bank for principal and interest combined across accounts in the same capacity. Spread large deposits over multiple banks if needed. If an insured bank fails, DICGC pays within the timelines set by law.

4. Loans, fair practices and recovery

• Key Fact Statement (KFS): lenders must give a standard summary of loan costs: annual percentage rate (APR), fees, charges and repayment schedule before you sign.
• Floating-rate loans: for retail floating-rate loans, lenders must give borrowers options when rates change, such as increasing EMI or tenure, and not levy prepayment charges on floating-rate loans to individual borrowers (other than business loans in specified cases). See prepayment strategy.
• Penal charges: penalties for non-compliance must be reasonable and not compounded as additional interest on the loan.
• Recovery: lenders and agents must not harass, threaten or contact you at odd hours. Recovery agents must follow RBI's fair practices code.
• Return of documents: after full repayment, lenders must return original property documents within a stipulated period or pay compensation for delay.
• Credit information: you can get one free full credit report a year from each credit information company, and lenders must handle disputes within the specified time. See credit score guide.

5. Digital lending

RBI's digital lending directions are meant to curb predatory loan apps:

• Loans must be disbursed directly into the borrower's bank account, and repayments made directly to the regulated entity, not through third-party accounts.
• Borrowers must be told the lending service provider and APR transparently, with a cooling-off or look-up period to exit without penalty (beyond proportionate APR).
• Apps must not access your contact list, photos or files without your explicit and limited consent.
• Regulated entities must report digital lending apps to RBI, and RBI has published a list of verified apps on its website. Check before borrowing.

Avoid unregistered apps, and read personal loan guide and scam awareness.

6. Credit cards

RBI's master directions for credit and debit cards require lenders to obtain consent before issuing cards or increasing limits, to provide clear terms, to avoid unsolicited cards, to allow closure within seven working days of a request, and to follow rules on charges and billing disputes. See credit card guide.

7. Cheques and bounced payments

A cheque is valid for three months. Dishonour of a cheque for insufficient funds can lead to action under Section 138 of the Negotiable Instruments Act. Positive Pay System for high-value cheques reduces fraud, where you confirm details with the bank.

8. Complaint redressal

1. Write to your bank or NBFC's grievance officer and note your complaint number.
2. If unresolved in 30 days, or if you are dissatisfied with the reply, approach the RBI Integrated Ombudsman Scheme through the CMS portal (cms.rbi.org.in), by email or by post. It is free and covers banks, NBFCs and payment system participants.
3. The Ombudsman can award compensation for financial loss and for harassment, subject to limits.
4. For other remedies, use consumer commissions. See consumer complaint guide.

9. NBFCs and investments

Deposit-taking NBFCs are regulated differently from banks, and their deposits are not covered by DICGC. Check the NBFC's registration on RBI's website and its credit rating before depositing. High returns usually mean high risk. See FD vs RD.

10. Foreign exchange and remittances

Under the Liberalised Remittance Scheme (LRS), resident individuals can remit up to US$250,000 per financial year for permitted purposes. Tax collected at source (TCS) rules apply on some remittances. Trading in forex is permitted only on recognised exchanges and with authorised dealers. See forex trading guide.

Keep copies of RBI circulars that affect you, and read your bank's notifications.

Frequently asked questions

What is my liability if my card is misused?

Zero if you report within three working days and the fault is not yours; otherwise limited or bank-policy based.

How much of my bank deposit is insured?

Up to ₹5 lakh per depositor per bank.

Where can I complain about a bank?

First to the bank, then to the RBI Integrated Ombudsman if unresolved in 30 days.

Are prepayment charges allowed on home loans?

Not on floating-rate loans to individuals, as per RBI rules.

What is a Key Fact Statement?

A standardised summary of loan terms, charges and APR given before sanction.

Are loan apps regulated?

Only those linked to regulated entities. Check the RBI list of verified apps.

Last reviewed 8 November 2026. Rates, limits and rules change, so confirm figures with the official source before you act.