Banks Ought To Investigate Fraudulent Transactions Per RBI Guidelines, Panchkula District Commission Holds SBI Liable

Brief Facts:

Mr. Tarsem Kumar Mahajan (“Complainant”) had a savings account with the State Bank of India (“SBI”), from which he was issued a debit classic card allowing a maximum withdrawal of Rs. 20,000/- in a day. On receiving a KYC update message on 05.08.2021, the Complainant clicked the provided link. Subsequently, his mobile malfunctioned, and upon restarting, he discovered three unauthorized transactions totalling Rs. 64,999/- from his bank account. The Complainant promptly reported the incident to SBI, filed a police complaint, and sought action against the fraudster.

The unauthorized withdrawals were facilitated by a failure in SBI's online software system, leading to a financial loss of Rs. 64,999/- to the Complainant. Despite numerous complaints, SBI failed to address the issue adequately. Feeling aggrieved, the Complainant approached the District Consumer Disputes Redressal Commission, Panchkula, Haryana (“District Commission”) and filed a consumer complaint against SBI.

In response, SBI argued that the Complainant was estopped from filing the complaint due to his actions and omissions. It claimed that an FIR was lodged against unknown persons, but the Complainant failed to disclose its status to the District Commission. It asserted that the fraud resulted from the Complainant's conduct. It argued that the bank never solicited KYC updates through messages, and the Complainant's negligence led to the unauthorized withdrawals.

Observations by the District Commission:

The District Commission referred to a circular issued by the Reserve Bank of India (RBI) on 06.07.2017, which outlined guidelines for banks to ensure the safety and security of electronic banking transactions. The circular stated that in cases of unauthorized transactions, if a customer suffers a loss, it is presumed to be due to the bank's failure to implement effective systems to prevent such occurrences, rendering the bank liable for the loss.

The District Commission noted that the Complainant promptly reported the unauthorized withdrawal of Rs. 64,999/- to SBI and filed a police complaint. Therefore, it held that the Complainant's actions demonstrated a timely response to the incident.

Further, the District Commission noted that SBI failed to adequately investigate the matter or demonstrate efforts to ascertain the identity of the fraudsters, as mandated by the RBI circular. Additionally, SBI did not provide evidence of implementing robust fraud detection and prevention mechanisms. Therefore, it held SBI liable for deficiency in services.

Consequently, the District Commission directed SBI to pay Rs. 64,999/- to the Complainant along with 9% interest per annum from the date of withdrawal until realization. It was also directed to pay a compensation of Rs. 10,000/- to the Complainant for mental agony and harassment along with Rs. 5,500/- for the litigation costs incurred by the Complainant.