Responsibility Of Bank To Prevent Unauthorized Transactions , Bangalore District Commission Holds SBI Liable

Brief Facts:

The Complainant received a message prompting him to update his PAN card. He provided the OTP under the impression that it came from the head office of the State Bank of India, Hyderabad (“Bank”). On the same day, between 6 pm and 7 pm, he incurred losses of Rs. 25,000/-, Rs. 20,000/-, and Rs. 19,000/- totalling Rs. 64,000/- from his SB and FD accounts. Due to bank holidays, he could only approach the Bank a few days later. He submitted a copy of the complaint lodged with the cybercrime police station. Despite multiple visits to the Bank over six months, he did not receive a satisfactory response. Feeling aggrieved, the Complainant filed a consumer complaint in the Additional District Consumer Disputes Redressal Commission-III, Urban Bangalore (“District Commission”) against the Bank.

In contrast, the Bank contended that the Complainant was provided with the YONO app service, a customer-friendly platform allowing logins with existing INB credentials via the YONO web portal. The app facilitates YONO cash withdrawals through ATMs upon OTP receipt and subsequent authentication with a unique reference number and temporary PIN. It contended that the transaction limits are set at Rs. 40,000/- daily and Rs. 20,000/- per transaction. It argued that since the Complainant shared login credentials and OTP, it bears no responsibility for any service deficiency.

Observations by the District Commission:

Upon reviewing the photo prints showing CCTV footage taken by the cybercrime police, the District Commission noted that the culprits behind the fraudulent transactions were identified, and investigations were ongoing to trace them. It noted that the Complainant promptly took measures by blocking his ATM card and SB account, registering complaints with both customer care and the cybercrime police.

The District Commission found negligence on the part of the Bank in safeguarding the Complainant's FD account. The District Commission referred to the RBI guidelines (DBR No. Leg.BC.78/09.07.005/2071-18 dated: 06.07.2017), specifically 7(i), which stipulates that in cases of customer negligence such as sharing payment credentials, the customer bears the initial loss until reporting it to the bank. Subsequent losses are the responsibility of the bank if they occur after reporting. The District Commission noted that the Complainant never shared any credentials and a sum of Rs. 25,000/- was siphoned out from his FD account. Hence, the District Commission held that while the Bank was not liable for losses from the SB account, it was responsible for those from the FD account.

Therefore, the District Commission directed the Bank to pay the Complainant Rs. 25,000/- for the FD account loss, along with 9% interest per annum. Additionally, it was directed to pay a compensation of Rs. 10,000/- to the Complainant for the mental agony and another Rs. 10,000/- as litigation costs.

Case Title: K. Venkatasubbaiah vs Manager, State Bank of India

Case Number: 217/2023

Date of Pronouncement: 12.06.2024