Axis Bank has been in the eye of a storm for some time now for various kinds of frauds. Recently a customer in New Delhi-Gurugaon had found that fraudsters had drawn money from his account through ATMs in Greece. When the customer complained Bank initially resisted the complaint but after the matter was taken to the Banking Ombudsman agreed to refund amount of  Rs. 664857.14  as per the advisory of Banking Ombudsman.

Now in yet another ATM fraud case in Mumbai, it is reported that the Bank restored a balance of Rs 2 lakhs wrongly withdrawn from the account of a TV actress Rashmi Gosh. The Bank officials have confirmed that there are many such ATM frauds reported to them and they are pursuing the police complaint.

Naavi has been pointing out to Banks that any frauds of this nature or in the Internet Banking scenario are the liabilities of the bank and it is their responsibility to pursue the complaint with the Police. However ICICI Bank and Punjab National Bank have been adamant and refusing to take responsibility for the loss as well as pursuing police complaints.

There are atleast two known cases against Punjab National Bank in Chennai amounting to around Rs 8 lakhs, one Case in Delhi for Rs 1.65 crores and another case in Nasik for around 17 lakhs pending against Punjab National Bank. There are many more reported instances in which customers have have not yet initiated legal action against the Bank.

Cases against ICICI Bank have also been numerous. There are also instances in Bank of India, State Bank of India and HDFC Bank where there are pending cases in different stages.

It is found that all Banks including ICICI Bank and Punjab National Bank have been selective in their response to Phishing and ATM frauds. In certain cases they agree to refund and certain cases they resist without any logic. Probably when they think that the customer can be bullied they resist and challenge the customer to take the route of litigation.  But If the Customer is a celebrity or is otherwise well connected they may respond better. The Mumbai case where Axis Bank has agreed to pay up appears to be one such case.

Even the Banking Ombudsmen have not been consistent in their decisions. While some Ombudsmen have given decisions in favour of the customer in cases of Phishing and ATM frauds some have rejected the claims principally on the ground that “The complaint requires examination of elaborate evidences and is therefore beyond their jurisdiction”.

Recently the Bangalore Ombudsman went one step further and while rejecting the complaint on the grounds of jurisdiction for evidentiary reasons ignoring all other aspects suggesting that the bank had violated the RBI code on customer service, he also advised that the customer does not have the right to appeal.

Coming back to Axis Bank, recently a customer in Bangalore found that Rs 39 lakhs were fraudulently transferred from their Axis Bank account through unauthorized access in which the customer had not responded to any phishing mail. The Bank however has refused to refund the amount on the first request. The matter is being pursued by the customer and  the next reaction of the Bank is awaited.

In the light of these inconsistent decisions of Banks in settling straightforward customer disputes, which can be called “Discriminatory”, “indicative of extraneous considerations”  etc., , the recommendations of the Damodar Committee on Customer Service in Banks constituted by Reserve Bank of India needs to be specially noted.

Under Chapter 3 of the report, the Committee has pointed out In Internet Banking, “There should be a secure total protection policy/zero liability against loss for any customer induced transaction utilizing technology through ATMs/POS/Online banking “etc.

It also states that the customer should not be made to be out of funds when any loss is suffered on account of Online/ATM banking transactions. ..An immediate temporary credit pending investigation should be afforded”.

Further, it states “Banks in their systems should have facility of customer behavior/purchase pattern etc. analysis and any attempt from an unknown address / suspicious outlier debit transaction should be first blocked and then informed over SMS to the customer. The transaction should be allowed only after the customer authorises the transaction.”

All the Phishing frauds provide very clear indication of unusual transactions such as a rush of transactions,often at night time, credits to unusual beneficiaries etc. Similarly the transactions at the receiving end also indicate credits disproportionate to the balances maintained, immediate withdrawal etc.

The observation of the committee therefore hits the nail on the head pulling up the deficiencies in the Banks. Even earlier RBI has through the Internet Banking guidelines and E Banking guidelines have repeatedly warned the Banks that they need to absorb liabilities on account of such frauds . Now, Damodar Committee report is a further reminder to the Banks which hopefully will be taken note off by all Banks including Axis bank, ICICI Bank, Punjab National Bank, Bank of India, HDFC bank and others in similar situations.

The Damodar Committee recommendations will also now be considered as guidelines for Adjudicating Officers, Cyber Appellate Tribunals, Banking Ombudsmen, Consumer Forums as well as the Banks as the expectations from the Bank’s side.

In the past some of the Banks have shown scant regard to RBI guidelines and in certain cases have even tried to manipulate the recommendations of committees in which they are allowed to participate as a representative of the Banking industry. RBI has not been able to bring them to discipline. It is time that RBI asserts itself and imposes hefty fines on Banks who deliberately flout the guidelines. Naavi has even demanded that in respect of one branch of ICICI Bank and one branch of Punjab National Bank, RBI should consider withdrawal of the Banking licence as a punishment for violating the RBI guidelines.

If RBI takes such tough stand in atleast a couple of cases then Banks may start respecting the regulatory authority of RBI.

Naavi of Naavi.org

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