Customer Is Responsible For Losses Caused By Their Negligence : Ernakulam District Commission Dismisses Complaint Against State Bank Of India

Brief Facts of the Case

The complainant had an SBI account at the Cochin Shipyard Branch in Ernakulam, Kerala. After receiving a message to update his PAN via a link, he followed it, resulting in Rs. 40,000 fraudulently debited from his account through SBI's YONO facility. The unauthorized transactions took place at the Jaipur Branch of SBI. Despite blocking his account, lodging a complaint with the bank, contacting cyber police, and issuing a lawyer's notice, the bank took no action. The complainant alleged that no OTP was requested, nor was there any verification call for the transaction. He claimed that SBI's inaction caused him significant mental distress and financial loss, as the bank failed to provide proper service and did not address the fraud or apprehend the fraudster. The complainant filed a complaint before the District Commission and sought a refund of Rs. 40,000 with interest @6% and compensation of Rs. 15,000 for the inconvenience caused, along with the cost of litigation.

Contentions of the Bank

The bank contended that the loss occurred due to the complainant's negligence in clicking an unverified link and sharing OTPs with fraudsters. Despite the bank's prompt action in blocking the account upon receiving the complaint to prevent further losses, the complainant had voluntarily followed instructions from an unknown sender without verifying the link's authenticity. The SMS Delivery Report confirmed that OTPs were sent and used for the transactions, indicating that the complainant had shared them. The bank emphasized that it continuously educates customers about online fraud risks and advises against sharing personal information. It was further argued that according to the Reserve Bank of India's guidelines, the customer is liable for losses due to such negligence.

Observations by the District Commission

The District Commission observed that a customer is liable for losses due to negligence, such as sharing payment credentials until the unauthorized transaction is reported to the bank. It was highlighted that after the complainant reported the issue, no additional money was lost, and the initial loss was due to the complainant's negligence. The Commission referred to the RBI notification on “Customer Liability in Unauthorized Electronic Banking Transactions” and the case II (2024) CPJ 310 (NC), which support that customers bear losses from their negligence until reporting, after which the bank is responsible for subsequent losses. The Commission found that the bank acted appropriately and was not at fault, as it provided necessary warnings and educational materials about online fraud.

Consequently, the District Commission dismissed the complaint and held the bank not liable.

Case Title: V.M. Philip Vs. State Bank of India

Case Number: C.C. No. 23/456