BANKERS LIABILITY UNDER ONLINE FRAUDS - RBI CIRCULAR CONFORMED BY NCDRC.

A few days back, the National Consumer Disputes Redressal Commission (NCDRC) has held the banks' liability to pay for the compensation amount to their customers if some of the bank fraud has been done on him in the case HDFC Bank & Anr. v. Jenna Jose (NCDRC, New Delhi, Revision Petition- 3333/2013). The concept is apt as the possibility of hacking, and other cyber-crimes cannot be ruled in this new era of digitalisation. If the bank's customer has committed some cyber-crime like fraud and there is no customer's fault, then the bank must compensate him as he is already innocent. The other thing to mention is that he is the bank customer, and according to the customer bank relationship, it is the duty of the bank to protect the customer from such commission of the crime. The crime has been committed due to the breach of the security done in the bank's system, so it makes clear the bank of the front scene for all the liabilities if the customer is not in the picture frame. The ruling was given by the presiding member of NCDRC, C. Viswanath, who stated that any fraud or hacking, or crimes could be done in this digital world. He stated that if the bank could not prove the account holder's fault, then the bank shall be held for the illegal operation of this kind of transaction. It will be deemed that this security breach has been taken place in the banking security system. "Bank cannot rely on arbitrary terms and conditions to wriggle out of its liability towards customers and any such terms and conditions must be in conditions must be in conformity with the directions issued by the RBI which is responsible for safekeeping of the Banking Systems and maintaining checks and balances in the same," the Commission said.

FACTS OF THE CASE

The facts of the case are that, a female had her HDFC bank credit card. The transaction took place through her card, but the transaction was different from where she was present that day. The transaction was done due to some fraud or hacking of the card or another reason for a security breach in the banking systems. On the other, the bank believed that the credit card was misplaced due to the cardholder's negligence, and they held her liable for the transaction made.

FINDINGS

The concerned bank could not produce any evidence of the cardholder's stolen credit card, and thereby their contentions were ruled out, and the appeal was upheld. The bank was held responsible for the illegal transaction made in the absence of evidence regarding their stolen credit card claim. The reliance was placed on the RBI's circular notification dated 6th July 2017, which states the following about the zero liability of the customer: "Limited Liability of a Customer (a) Zero Liability of a Customer. A customer's entitlement to zero liability shall arise where the unauthorised transaction occurs in the following events: i. Contributory fraud/ negligence/ deficiency on the part of the bank (irrespective of whether or not the transaction is reported by the customer). ii. Third party breach where the deficiency lies neither with the bank nor with the customer but lies elsewhere in the system, and the customer notifies the bank within three working days of receiving the communication from the bank regarding the unauthorised transaction."

CONCLUSION

Hence, the bottom line is that if the account is managed and taken care of by the bank, then, of course, it is the responsibility of the bank for its safety and security. If any malfunction in their system appears due to which the customer bears any losses, then the bank only would be held liable for this act and not the customer further to which the banks have to repay all the losses to the customer.