Bank account holder? Will you lose money if unauthorised withdrawal from account happens?
The Kerala High Court has said banks cannot be absolved of liability for unauthorised withdrawals from their customers' accounts. Justice P B Suresh Kumar also made it clear that banks are liable for unauthorised withdrawals even if customers did not respond to SMS alerts.
Bank transaction: SMS Alert
'Refund of amount with interest'
Bank account to be blocked
Protect customers' interest
It contended that since the customer did not respond to the SMS alerts, the bank was not liable for the loss caused to him. "...One thing is certain that where a bank is providing service to its customer, it owes a duty to exercise reasonable care to protect the interests of the customer," the court said. (Reuters)
'Bank is liable'
"(It is) needless to say that a bank owes a duty to its customers to take necessary steps to prevent unauthorised withdrawals from their accounts," it added. "As a corollary, there is no difficulty in holding that if a customer suffers loss on account of the transactions not authorised by him, the bank is liable to the customer for the said loss," the court said. (Reuters)
'Safe Electronic Transaction
Referring to a Reserve Bank of India circular which stated that unauthorised transactions shall be brought to the notice of the bank forthwith to enable it to block the account, the court said it only reminds banks of their obligations and responsibilities and does not create any new rights or obligations. (Reuters)
In short, there is also no difficulty in holding that if a customer suffers loss in connection with transactions made by fraudsters, it has to be presumed that it is due to the bank's failure to put in place a system which prevents such withdrawals, and the banks are, therefore, liable for the loss caused to their customers, the court said. (Reuters)