caalley logo

The alley for Indian Chartered Accountants

If alerted promptly, bank must compensate for cyber fraud: Consumer court

Surat, Oct 26, 2023

A bank is liable to compensate its customers for the money lost in cyber fraud if they are promptly alerted, and not doing so is serious carelessness.

The Navsari Consumer Disputes Redressal Commission (CDRC) made these scathing observations while ordering the State Bank of India (SBI) to pay a UPI cyber fraud victim Rs 39,578 as she personally walked into the branch the same day she lost the money.

The commission observed that the bank could have promptly acted as it has all the technical wherewithal to know where the siphoned-off money was deposited.

In this case, Navsari resident Vidhi Suhagiya, who has an account in the SBI's Fuvara branch, lost Rs 59,078 in cyber fraud and the money was debited without her knowledge on December 22, 2021.

She immediately walked into the branch and informed them about the cheating. After lodging a complaint on the cyber crime helpline, police managed to freeze Rs 19,500 that was deposited in a Federal Bank account. Cops transferred the money to her account following a court order.

CDRC junked bank’s argument that it was customer’s mistake

However, as the bank was dragging its feet on the remaining Rs 39,578, she sent a legal notice to SBI on December 14, 2022. As the bank did not reply, Suhagiya lodged a complaint with the consumer commission.

Suhagiya's advocate argued, "The bank informed us that Rs 39,578 was transferred to an account of ICICI Bank. But they did not take any action to get it back. The amount was debited through UPI and without sharing of OTP or password to anyone."

Arguing that she was defrauded due to her carelessness, the bank's advocate contended that it was only because of the bank's SMS system that the woman came to know about the debit. "After the customer informed the bank, SBI acted as per banking guidelines. The bank had sent an e-mail to the UPI authority which replied that the amount was deposited in ICICI Bank and steps were taken to freeze the amount."

CDRC, however, rejected the bank's argument that the mistake was that of the customer and that it was not liable to compensate. It observed that the complainant had informed the bank the same day "but there is no evidence on record that the bank had acted on the complaint".

"When any amount is debited from an account, the bank has online details about the account it has been deposited in. So, if the bank wants, it can inform the other bank to stop payment or freeze the amount. In this case, the bank failed to do so which resulted in financial loss to the complainant," observed the commission.

The bank failed to provide any evidence that it had tried to recover that amount. "The bank did not act promptly on the complaint and committed serious carelessness and a mistake in service."

[The Times of India]

Read more on:
Don't miss an update!
Subscribe to our newsletter