Tuesday, 2 April 2013

Banks in India to Pay Penalty for Delayed Refund of Failed ATM Transactions

Reserve Bank of India (RBI), India's Central Bank, on 27th May 2011 issued revised guidelines for payment of compensation by issuing banks* to the customers for failing to credit the amount of failed ATM transactions within 7 working days of the receipt of complaint. Revised guidelines became effective from July 1, 2011 and are subject to conditions stipulated by RBI. RBI's Department of Payment and Settlement Systems issued these guidelines vide their circular number DPSS.PD.No.2632 / 02.10.002 / 2010-2011 dated May 27, 2011 issued to The Chairmen and Managing Directors / Chief Executive Officers of All Scheduled Commercial Banks including RRBs, Urban Co-operative Banks, State Co-operative Banks, and District Central Co-operative Banks. Relevant portion of the guidelines is as under:

Also Read: How Reserve Bank of India Contradicted its own Guidelines on ATM Compensation (opens in new window)

(i) The time limit for resolution of customer complaints by the issuing banks* shall stand reduced from 12 working days to 7 working days from the date of receipt of customer complaint. Accordingly, failure to recredit the customer’s account within 7 working days of receipt of the complaint shall entail payment of compensation to the customer @ Rs. 100/- per day by the issuing bank.

(ii) Any customer is entitled to receive such compensation for delay, only if a claim is lodged with the issuing bank* within 30 days of the date of the transaction. 

*"Issuing Bank" means the bank where the customer has his/her account or the bank that issued the ATM/Debit card to the customer. Bank customers in India can use ATM of any other bank for withdrawing cash. The bank whose ATM is used is called "acquiring bank". 

The revised guidelines further stipulated that "the number of free transactions permitted per month at other bank ATMs to Savings Bank account holders shall be inclusive of all types of transactions, financial or non-financial." This means the earlier limit of 5 transactions per month subject to a maximum of Rs. 10,000 per month stands but would include balance enquiries, etc. 

Guidelines of May 27, 2011 replace earlier guidelines dated July 17, 2009 that allowed banks 12 working days to re-credit the amount of failed ATM transactions. New guidelines though reduced the time available to banks but made it mandatory for customers to lodge complaint with issuing bank within 30 days of the date of transaction. I would like to clarify here that the time limit of 30 days is relevant only for claiming compensation of Rs. 100 per day of delay. A customer is free to file a complaint of a failed ATM transaction even after 30 days of transaction, only he/she can claim the amount of failed ATM transaction without extra compensation. 

Let it be very clear that the question of compensation at the rate of Rs. 100 per day will arise only if a customer's claim of failed ATM transaction is honoured by the concerned bank. If the issuing bank or the acquiring bank take a stand that the transaction was successful and reject the customer's claim, there will be no refund of disputed amount and obviously no compensation. Things get complicated from this point onwards. 

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All information given in this blog is obtained from sources in the public domain, RTI applications, discussions with bankers, bank customers in India and also with some employees of Reserve Bank of India having knowledge of the working of various Offices of Banking Ombudsman in India. All information in this blog is presented on a best effort basis and is not claimed to be complete information on any of the subjects covered in this blog. Use of any information given in this blog is purely voluntary on the part of the readers. Author of this blog does not assume any responsibility for any action of the readers related to any matter discussed in this blog or any consequences thereof. Readers of this blog are advised to consult a legal practitioner before taking any action related to any matter discussed in this blog.