The RBI has also proposed a raise in insurance on bank deposits to Rs 5 lakh and having a single common toll free call number for all banks, besides zero liability against loss in ATM and online transactions.
These form part of the recommendations of the Committee on Customer Service in Banks, constituted under chairmanship of former SEBI chairman M Damodaran, by RBI last year.
The committee -- which was tasked to look into banking services rendered to retail and small customers, including pensioners -- had submitted its report last month and the proposals were released into the public domain today.
In its report, the Damodaran committee proposed "instant blocking of ATM card through SMS-block for lost/misused cards." It is expected to help people who currently are required to call up the bank in case of card loss.
"If an ATM card has been misused by another person, on receipt of SMS about use of the card, the customer should be able to immediately send return SMS to block the card with a single word like ''BLOCK'' to prevent further withdrawals.
"...It is observed that considerable time is lost in locating the numbers of accounts, phone numbers etc., which gives the fraudsters more time to commit fraud," the report said.
The report further recommends that in case of default by banks, the Rs one lakh cover guaranteed to each account under current rules should be raised to Rs 5 lakh.