₹12 lakh ATM fraud: ₹5 lakh compensation shows senior citizens, others why PIN and OTP safety matters

A recent consumer court decision has highlighted the need for banks to adhere to stringent security protocols when issuing debit cards, especially to customers who are elderly or illiterate.

The Maharashtra State Consumer Disputes Redressal Commission directed Bank of India to pay ₹5 lakh as compensation to a 65-year-old woman after more than ₹12 lakh was allegedly withdrawn from her account through unauthorised ATM transactions, according to a report by Press Trust of India.

The commission noted that while banks cannot be held liable for every fraudulent transaction, they are expected to follow basic safeguards when issuing ATM-cum-debit cards.

“Determination of deficiency in consumer jurisdiction does not proceed on the footing that every unauthorised transaction automatically fastens liability on the bank,” the commission observed. However, it added that banks still have a duty to ensure compliance with basic security protocols.

Higher duty of care for senior citizens

She later alleged that ₹12.47 lakh was withdrawn from her account through ATM transactions and purchases, including jewellery, wine and a television.

The bank argued that the transactions were carried out by a third-party criminal and that it had issued the standard welcome kit containing the debit card and PIN after the customer acknowledged receipt.

The commission pointed to a key document, the bank’s kit acknowledgement form, which claimed that the customer had signed the debit card’s signature band in the presence of bank officials.

The complainant, however, maintained that she had never signed it.

“This is not just a formality. The signature band serves to confirm the account holder’s identity and is a basic safeguard against misuse,” the commission said, PTI reported.

It further emphasised that banks must take extra care when dealing with vulnerable customers.

“In cases involving elderly customers with limited literacy, the standard of care expected from the service provider is naturally higher,” the commission stated.

While the panel acknowledged that a criminal case related to the transactions is pending before a magistrate's court, it said the bank could not escape accountability simply by attributing the fraud to another person.

The commission ordered the bank to pay ₹5 lakh as compensation, along with ₹25,000 towards litigation costs.

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The burden of proving customer negligence would lie with the bank, while compensation would have to be credited within five days of receiving the application.

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