UPSC Prelims Practice Questions — RBI Strengthens Framework on Unauthorised Electronic Banking Transactions

Q1. Under RBI's 2017 framework on limiting customer liability in unauthorised electronic banking transactions, for which one of the following account categories is the maximum customer liability prescribed (in the four-to-seven working-day reporting window) the highest?

  • A. Basic Savings Bank Deposit Accounts (BSBDA)
  • B. Savings accounts and Prepaid Payment Instruments (PPIs)
  • C. MSME accounts and credit cards with limit up to Rs 5 lakh
  • D. Other current accounts and credit cards with limit above Rs 5 lakh

Q2. In which year did the RBI first issue its comprehensive circular limiting the liability of customers of scheduled commercial banks in unauthorised electronic banking transactions?

  • A. 2008
  • B. 2016
  • C. 2017
  • D. 2019

Q3. With reference to the RBI draft amendment (issued for public consultation in March 2026) to the framework on unauthorised electronic banking transactions, consider the following statements: 1. The draft introduces a compensation mechanism for small-value fraudulent electronic banking transactions, a feature not present in the 2017 framework. 2. The revised instructions build upon the extant instructions that the RBI had first issued in 2017. 3. The draft shifts the burden of proving customer liability from the bank onto the customer. Which of the statements given above is/are correct?

  1. The draft introduces a compensation mechanism for small-value fraudulent electronic banking transactions, a feature not present in the 2017 framework.
  2. The revised instructions build upon the extant instructions that the RBI had first issued in 2017.
  3. The draft shifts the burden of proving customer liability from the bank onto the customer.
  • A. 1 and 2 only
  • B. 2 and 3 only
  • C. 1 and 3 only
  • D. 1, 2 and 3

Q4. Which one of the following is the principal new safeguard for customers introduced by the RBI's March 2026 draft amendment to the framework on unauthorised electronic banking transactions?

  • A. A compensation mechanism for small-value fraudulent electronic banking transactions
  • B. Extension of the zero-liability reporting window to thirty working days
  • C. Complete abolition of the limited-liability category
  • D. Transfer of grievance redressal from banks to the Banking Ombudsman alone

Q5. The RBI's draft instructions on unauthorised electronic banking transactions fall within the administrative purview of which one of the following departments of the Government of India?

  • A. Department of Financial Services, Ministry of Finance
  • B. Department of Economic Affairs, Ministry of Finance
  • C. Department of Revenue, Ministry of Finance
  • D. Department of Expenditure, Ministry of Finance

Q6. The early RBI deliberations on protecting bank customers, which preceded the framework on customer liability, are associated with the Committee on Customer Service in Banks set up by the RBI under the chairmanship of:

  • A. M. Damodaran
  • B. Nachiket Mor
  • C. Nandan Nilekani
  • D. Y. H. Malegam

Q7. The 2017 master circular limiting customer liability for scheduled commercial banks was issued by which department of the Reserve Bank of India?

  • A. Department of Banking Regulation (DBR)
  • B. Department of Payment and Settlement Systems (DPSS)
  • C. Department of Supervision (DoS)
  • D. Consumer Education and Protection Department (CEPD)

Q8. The AI/ML-based solution MuleHunter.AI, used to identify mule bank accounts, was developed in-house by which one of the following?

  • A. Reserve Bank Innovation Hub (RBIH)
  • B. National Payments Corporation of India (NPCI)
  • C. Indian Cyber Crime Coordination Centre (I4C)
  • D. Indian Computer Emergency Response Team (CERT-In)

Q9. MuleHunter.AI was first piloted by the RBI with banks belonging primarily to which one of the following categories?

  • A. Public sector banks
  • B. Private sector banks
  • C. Payments banks
  • D. Urban co-operative banks

Q10. In a case of unauthorised electronic banking transaction under the RBI framework, the burden of proving customer liability rests primarily on which one of the following?

  • A. The bank
  • B. The customer
  • C. The Banking Ombudsman
  • D. The law-enforcement cyber-crime cell

Q11. MuleHunter.AI, the RBI's AI/ML-based fraud-detection initiative, is intended primarily to serve as a faster and more accurate alternative to which one of the following existing approaches used by banks?

  • A. Static rule-based detection systems
  • B. Two-factor authentication for transactions
  • C. Periodic manual KYC re-verification
  • D. The Banking Ombudsman grievance mechanism
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