ATM frauds: Banks have to reimburse withdrawals

Imagine the distress of an 80-year-old man when he finds that his only source of income — his bank deposit — has disappeared without a trace. That's exactly what happened to KK Bhalla five years ago. Pushpa Girimaji writes.

Imagine the distress of an 80-year-old man when he finds that his only source of income — his bank deposit — has disappeared without a trace. That's exactly what happened to KK Bhalla five years ago.

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On May 11, 2006, when he checked the balance in his savings bank account, he found that someone had withdrawn Rs 65,116 through the ATM and left only Rs 391 balance.

Even though banks know only too well that fraudsters use a variety of electronic devices to capture data on ATM cards while they are being used and then withdraw money from the ATM using this information, the bank in this case argued vehemently that it was impossible for anyone to fraudulently withdraw money from an ATM.

The consumer courts at district and state level, however, did not buy this argument and pointed out that if that were so, then they would not have got so many complaints of fraudulent withdrawal from ATMs.

They also pointed out that it was to detect such frauds that banks are supposed to install CCTVs. In this case, the bank was not producing the CCTV footage, saying that it was unavailable.

The bank, therefore, had no other option but to make good the loss to the consumer and also pay Rs 15,000 as compensation.

The National Consumer Disputes Redressal Commission has, however, set aside the order of the lower consumer courts on the ground that it was not possible to withdraw money from an ATM by an unauthorised person when the card and the PIN were secure with the customer. (SBI Vs KK Bhalla, RP No 3182 of 2008, decided on April 7, 2011)

Today, for safety experts the world over, the biggest concern about ATMs is the problem of skimming, where thieves attach a skimming device over the card slot in the ATM to capture the information on the magnetic strip and then use a hidden camera to record the PIN code keyed in by the consumer.

More sophisticated ones use a wireless keypad overlay that transmits a person's PIN to a nearby laptop instead of a camera. Countries such as Canada and in Europe companies are switching over from a magnetic strip (on the ATM card) to a microchip technology as a safer option.

India is not insulated from such frauds and banks are well aware of such cases. Yet, in this case, the bank lied when it told the court that it was impossible to make any such fraudulent withdrawal. I also wonder whether the bank really did not have the CCTV footage or did not produce it deliberately.

Either way, the bank has to take responsibility for the absence of any CCTV footage. To say the least, the apex consumer court has badly let down the consumer in this case.