The Supreme Court has held that banks are responsible for protecting their customers from unauthorised transactions, provided such incidents are promptly reported. The ruling came in a case involving the State Bank of India (SBI), where fraudulent transactions amounting to ₹94,204.80 were conducted from a customer’s account.
A bench comprising Justices JB Pardiwala and R Mahadevan observed that banks must leverage their advanced technology to detect and prevent fraudulent activities. “It is the responsibility of the bank to safeguard customers from unauthorised and fraudulent transactions,” the bench stated.
The case involved Pallabh Bhowmick, who fell victim to a fraud after attempting to return an online purchase. A scammer posing as customer care instructed him to download a mobile app, enabling the unauthorised transactions. While SBI denied liability, citing the sharing of sensitive details like OTPs and MPINs, the customer argued that no such information was disclosed and attributed the fraud to a retailer’s data breach.
The Gauhati High Court had earlier ruled in favor of the customer, referencing the Reserve Bank of India’s (RBI) July 6, 2017 circular. The circular states that customers bear “zero” liability for unauthorised transactions stemming from third-party breaches if reported promptly.
Upholding the High Court’s decision, the Supreme Court noted that the fraudulent activity was reported within 24 hours. However, the Court also emphasised the need for customers to exercise caution. “Customers must remain extremely vigilant and ensure OTPs are not shared with third parties. Negligence on the part of account holders could also attract liability in specific cases,” the bench warned.
The petition filed by SBI challenging the High Court’s judgment was dismissed, reinforcing the bank’s accountability while urging customers to adopt preventive measures against fraud.