Under the RBI's revised guidelines, liability will be shared by banks and customers depending on the circumstances under which the fraud took place.
Bank heists have not gone out of fashion just yet, both as a cinematic trope, and also as a shortcut to riches. A total of 972 such incidents were reported in 2017-18, roughly three every day, according to data collated by the Reserve Bank of India (RBI).
The information was furnished by the Minister of State (MoS) for Finance in the Lok Sabha in response to a question regarding the number of ATM robberies, and the safety of financial outposts in the country. The data presented in the lower house of parliament includes incidents of robbery, dacoity, burglary, and theft directed at financial institutions in the last three years.
The banking sector lost a total of Rs 168.74 crore to organised crime directed at ATMs in the past three years. This includes figures for the first quarter of FY19. Between April and June 2018, 261 incidents were reported, entailing a loss of of Rs 18.85 crore to banks.
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For the financial year ended March 2018, the maximum number of untoward incidents in banks and ATMs was reported in Bihar. Financial institutions lost Rs 3.35 crore from a total of 147 incidents. Security is also lax in Delhi and Haryana, where 53 and 49 ATMs were targeted, resulting in the loot of cash amounting to Rs 2.25 crore and Rs 3.34 crore respectively.
Uttar Pradesh has consistently ranked among the riskiest state for lenders. In 2017-18, there were 85 heists at ATMs, setting back banks by Rs 2.09 crore. West Bengal also witnessed over 100 such incidents in past financial year.
The number of such crimes at Indian bank branches and ATMs has remained relatively stable over the past three years. A total of 1,012 incidents were reported across the country in 2016-17, the highest in the past three years. The tally reduced marginally to in 2017-18.
However, in terms of the quantum of cash looted, there has been a slight improvement. From a high of Rs 65.3 crore in 2016-17, the amount of cash lost in ATM heists went down to Rs 44.49 in 2017-18. In the first quarter of the present financial year, 261 attempts at robbery have already been recorded, with the loss pegged at Rs 18.85 crore.
The report does not indicate whether the perpetrators were thwarted afterwards. The recovery of cash is also not mentioned.
With a lot of essential financial services shifting to the digital space, the number of frauds targeting online transactions has also increased. In 201718, a total of 911 frauds were committed using debit and credit cards obtained using ungainful means by miscreants. The sum total of money that went into the wrong hands stands at Rs 65.26 crore.
The Reserve Bank of India changed its norms to limit liability of customers to card fraud in July 2017. Under the revised guidelines, liability will be shared by banks and customers depending on the circumstances under which the fraud took place.
Customers are exempted from liability if the fraud happened due to the negligence of the bank or a third-party breach where the liability is not on the bank or the customer, but on the system. On the other hand, customers will have to bear the loss if fraud occurred due to negligence on their part. In such cases, customers are liable for losses accrued before they report it to the bank.
If more money is transacted without authorization after the breach has been reported to the bank, then the bank is liable to compensate customers. Moreover, if the delay in reporting stretches beyond seven days, then the jurisdiction on settling the liability will lie with the policy approved by the bank’s board. Banks are required to showcase their policy in settling online fraud in the public domain to forewarn customers about liability to fraud.
The most number of card frauds were targeted at ICICI Bank customers in 2017-18. As many as 348 cases were reported, wherein Rs 7 crore was embezzled. State Bank of India customers were defrauded to the tune of Rs 10 crore, in 144 reported cases.
However, the biggest fraud happened at City Union Bank, where Rs 32 crore was stolen in a single case.
The RBI has advised banks to upgrade security at bank branches and ATMs. The measures proposed include installing CCTV cameras at ATMs and doing a thorough background check on security personnel manning these facilities.
Furthermore, the central bank issued a circular titled ‘Control Measures for ATMs – Timeline for Compliance’ on June 21, which asks banks to upgrade the software plying on ATMs to neutralize fraud and robbery.According to a written reply to a question raised in the Lok Sabha, the government has said that it is currently tracking banks’ progress in complying with the RBI’s guidelines. The additional loss from fraud and theft is relatively small when compared to banks’ bad debt. However, banks can plug unnecessary loss arising from such cases by expediting efforts at upgrading security, both at ATMs and also in their digital payments gateways.