SBI Ordered by Consumer Commission to Refund ₹1.64 Lakh in Online Banking Fraud Case

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Consumer Commission mandates SBI to repay ₹164,000 after an unauthorized online banking transaction, emphasizing banks’ obligation to prove customer negligence.

The Commission’s Ruling

The District Consumer Disputes Redressal Commission in Punjab’s Tarn Taran mandated the State Bank of India (SBI) to return ₹164,000 to a client who suffered losses due to an unapproved digital banking activity. The ruling also required the bank to provide ₹15,000 in compensation for emotional distress and ₹10,000 for legal costs.

Failure to Demonstrate Customer Fault

The commission determined that the bank failed to demonstrate the customer’s fault and deemed the rejection of the claim without a proper examination as a service deficiency. The commission’s July 28 decision stated that SBI could not verify whether the disputed transaction was authorized by the customer or resulted from their oversight.

Customer Allegations

The customer alleged that ₹164,000 was withdrawn from their savings account without their awareness or approval. They asserted that they never disclosed their ATM PIN, one-time password (OTP), internet banking details, or other sensitive financial data to anyone.

Legal Framework and RBI Directive

The complainant cited the Reserve Bank of India’s July 6, 2017, directive titled *Customer Protection – Limiting Liability of Customers in Unauthorised Electronic Banking Transactions*, which safeguards users who report unauthorized digital transactions stemming from third-party breaches.

*Customer Protection – Limiting Liability of Customers in Unauthorised Electronic Banking Transactions* mandates that banks must prove customer negligence to deny protection against unauthorized electronic transactions.

SBI’s Defense and Commission’s Rejection

SBI contested the claim, arguing that the transaction could not have occurred without the customer’s login credentials and OTP. The commission rejected SBI’s argument, noting the bank lacked technical documentation such as investigation reports, server logs, IP address records, forensic analyses, or other digital evidence proving the customer’s involvement.

Evidence-Based Investigation Required

The commission emphasized that under RBI regulations, the bank must prove customer negligence to deny protection against unauthorized electronic transactions. The ruling highlighted that the bank’s rejection of the claim was based on assumptions rather than evidence.

Legal and Industry Implications

Legal analysts view the decision as a critical affirmation of consumer rights in cyber-related banking fraud cases. The order reinforces that financial institutions cannot dismiss claims solely based on assumptions of customer fault. Instead, they must present credible technical evidence and adhere to transparent investigative procedures before denying liability.

Precedent for Future Disputes

The ruling sets a precedent for future disputes involving unauthorized electronic transactions. It underscores that banks are obligated to conduct thorough, evidence-based examinations in line with RBI guidelines when a customer reports unauthorized activity. Non-compliance constitutes a service failure.

Conclusion

The commission’s decision reaffirms the responsibility of financial institutions to safeguard customer interests and adhere to regulatory frameworks. It highlights the importance of transparency, evidence, and accountability in resolving disputes related to unauthorized digital banking transactions.