Customer Service – Reversal of Erroneous Debits arising on Fraudulent or Other Transactions

Reserve Bank of India has vide its Circular No.DBOD.No.Leg.4722/09.07.007/2007-08 dt. October 23, 2007 has informed all commercial Banks that in recent past it has noticed huge amount was fraudulently withdrawn from constituent’s account due to which the customer was out of funds resulting in inconvenience to the customer.

Reserve Bank of India has therefore advised banks that once the bank is convinced that an irregularity / fraud has been committed by its staff towards any constituents, it should at once acknowledge its liability and pay just claim. It has further advised that

1. in case where bank is at fault, the bank should compensate customer without demur and
2. in cases where neither the bank nor the customer but fault lies elsewhere in the system then also bank should compensate the customers up to a certain limit as a part of Board approved customer relation policy

Therefore in view of maintaining good relations with the customer, in this regard we recommend as follows:
If the bank has caused an unauthorized/erroneous direct debit to an account, the entry will be reversed immediately on being informed of the erroneous debit, after verifying the position. In the event the unauthorized/erroneous debit has resulted in a direct financial loss for the customer by way of (i) reduction in the minimum balance applicable for payment of interest on savings bank deposit or (ii) payment of additional interest to the bank in a loan account, the bank will reimburse the customer for such loss. Further, if the customer has suffered any direct financial loss incidental to return of a cheque or failure of direct debit instructions due to insufficiency of balance on account of the unauthorized/erroneous debit, the bank will reimburse the customer to the extent of such direct financial losses. However, financial loss mentioned hereinabove will not cover any loss incurred by the customer due to loss of reputation or loss of profit.
In case verification of the entry reported to be erroneous by the customer does not involve a third party, the bank shall arrange to complete the process of verification within a maximum period of 15 working days from the date of reporting of erroneous debit. In case, the verification involves a third party, the bank shall complete the verification process within a maximum period of one month from the date of reporting of erroneous transaction by the customer.

As regards clause no. (ii) above bank will reimburse depending upon the facts of the case and on case to case basis up to 25% of the loss suffered by the customer.
We further recommend delegation of powers for reimbursing customers to Executives as follows:
where;

1. Bank is at fault ;

Designation                                      Amount
Assistant General Manager               up to Rs.50,000/-
General Manager                             More than Rs.50,000/-
Staff Accountability would be fixed and amount would be recovered from staff concerned.

2.  Neither bank nor customer is at fault but the fault lies elsewhere in the system:

Designation                          Amount
Chairman & CEO                 25% of loss or Rs.25,000/-  whichever is lower
General Manager                25% of loss or Rs.10,000/-  whichever is lower
Deputy General Manager   25% of loss or Rs.7,500/-  whichever is lower

Assistant General Manager           25% of loss or Rs.5,000/-  whichever is lower