CHENNAI: Across Tamil Nadu, consumer forums are quietly redrawing the line of accountability between banks and their customers, ruling that lenders — not victims — must bear the cost of unauthorised digital debits. A series of recent orders reveal a growing judicial impatience with banks that fail to act promptly after fraud reports, despite long-standing RBI guidelines.
A Quiet Legal Shift in the Digital Age
When S. Muthu, a 64-year-old retiree from Madipakkam, received an SMS in late 2024 claiming that his ATM card had been blocked for not updating his PAN details, he thought little of it. The message appeared genuine, even followed by a WhatsApp call from a man posing as a bank executive who confirmed his PAN and name before sending what looked like an official email.
Minutes later, Muthu entered his details into the provided link — and unknowingly handed control of his account to fraudsters. The next morning, ₹11.58 lakh vanished from his account within five minutes.
Although Muthu immediately reported the incident and had his account frozen, the bank later argued that the freeze had been lifted “on his own request.” Frustrated, he filed a legal notice demanding reimbursement and compensation for mental agony.
The District Consumer Disputes Redress Commission (North) in Chennai, presided by D. Gopinath, sided with Muthu. Citing the Reserve Bank of India’s July 6, 2017 circular, which mandates that disputed amounts be re-credited within ten working days of customer notification, the forum ordered the bank to refund the ₹11.58 lakh and pay additional compensation.
Banks Under Scrutiny for Delayed Action
Consumer forum officials say that district commissions across Tamil Nadu have granted relief in more than a dozen similar cases in recent months. Their rulings share a recurring theme: banks’ failure to act swiftly once customers raise red flags.
In one case, Madhumitha of Anna Nagar fell victim to a courier-service scam in which fraudsters used her credentials to secure a ₹15 lakh personal loan and siphon off another ₹4.87 lakh from her account. Despite her complaint within 24 hours, the bank froze only her account and not the fraudsters’ — allowing them to complete the transfers. The commission found the bank negligent and directed it to refund the lost ₹4.87 lakh and pay ₹2 lakh as compensation.
“The bank’s failure to act promptly after a timely complaint constitutes a clear deficiency in service,” the forum observed.
The RBI’s 2017 Rule — and Banks’ Reluctance
The RBI circular of 2017 was meant to establish a clear liability framework in cases of unauthorised electronic transactions. It required banks to bear full responsibility if the fraud occurred without customer fault and the incident was reported within three days. Yet, consumer-rights lawyers and officials say implementation remains inconsistent.
“Many banks either delay the provisional credit or deny liability altogether,” said a senior forum official in Chennai. “The 2017 guidelines are clear, but the compliance culture is not.”
Experts note that despite the rise of digital banking and the RBI’s emphasis on zero-liability protection, many customers still face lengthy battles for reimbursement — a gap consumer forums are now beginning to fill.
Consumer Forums Step In as Last Resort
In the absence of uniform enforcement, district forums have become the de facto venue for victims seeking restitution. Officials note a steady rise in complaints over the past year, particularly involving phishing links, courier scams, and fake investment calls.
“People trust the official-looking messages and lose large sums within minutes,” said a senior member of a Chennai consumer commission. “Our orders are meant not only to provide relief but also to remind banks of their duty to protect customers.”
The shift has wider implications for India’s fast-digitising economy. As the number of UPI, card, and internet-banking transactions surges, so do the risks — and the legal expectations on financial institutions to respond swiftly and fairly.
