Thursday, 4 April 2013

Why Bank Customers in India Lose Money in Failed (Cash Not Received) ATM Transactions

Bank ATMs (Automated Teller Machines) in India are not the safest ATMs in the world. In fact many of the standard safety / security features that are supposed to be part of an ATM or ATM cabin are often found missing or non-functional. This is a cause for worry as the absence of security features results in reduced probability of recovering money lost in a Failed ATM Transaction. The main areas of concern are as under:

1. Missing / Non-functional Built-in ATM Camera / CCTV Camera

Many times, bank ATMs either do not have a built-in ATM camera or the quality of recording is so poor that even the face of the person using the ATM is not captured clearly. CCTV camera is present in some ATM cabins while many others do not have any CCTV camera. Recordings of built-in ATM cameras and CCTV cameras are typically preserved for a maximum of 3 months and 1 month respectively. Preservation of recordings is left at the mercy of the vendors who very often do not produce recordings citing reasons such as "hard disk failure" or "technical snag" etc. If implemented properly, camera recordings can provide vital clues to resolve complaints relating to failed / disputed ATM transactions. Unfortunately, there are no Reserve Bank of India guidelines on the installation of CCTV / ATM camera or on preservation of recordings for a particular period of time. Hence, these vital security measures are left to the discretion of banks who are guided more by commercial (read Profit) considerations rather than safety of the depositors' money.

2. Off-site ATMs Without Any Security Guards

Due to absence of Reserve Bank of India guidelines, many of the off-site bank ATMs function without any bank security guard. There have been instances in and around Chandigarh U.T. and Ambala district of Haryana where such unmanned ATMs of SBI Group were used by fraudsters to clone ATM cards of unsuspecting customers during the years 2010 and 2011. Several customers lost money when fraudsters withdrew money from their accounts using cloned ATM cards. Some of the fortunate customers got their money back after the Banking Ombudsman in Chandigarh issued orders to the concerned banks to refund the money involved in such fraudulent transactions, but many victims of fraudulent ATM withdrawals around the country were not so lucky.

3. Cash In ATMs Is Filled by Vendors Not Accompanied By Bank Staff

Most banks have outsourced the work of putting cash in off-site ATMs. Vendors' staff are nor accompanied by bank's officials at the time of such operations. It is at least theoretically possible that the vendors may find some excess cash in the ATM at the time of refilling. If such excess cash is not reported by the vendors' personnel to the bank and is pocketed by someone, a victim of a Failed ATM Transaction will most likely lose their money. Take a look at this news item: 
http://articles.timesofindia.indiatimes.com/2013-02-16/delhi/37132451_1_cash-replenishment-atms-slot

Banks usually take the plea that cash from an ATM cannot be withdrawn without the use of ATM card and the ATM PIN that is known only to the customer. If no excess cash is found, the possibility of any technical fault in the ATM gets automatically ruled out resulting in a total loss situation for the hapless customer.      

4. Claims / Complaints of Failed ATM Transactions Are Rejected Without Any Inquiry

Some standard documents such as EJ / JP Log (A journal printer inside the ATM prints all transactions for record), Switch Report (Back End Server Report), and Cash Reconciliation Statement are mainly used to reject / accept claims of Failed ATM Transactions. If the EJ/JP Log report contains the Error Code: "000", Switch Report marks the transaction as "Successful" and no excess cash is reported in the Cash Reconciliation Statement, the claim will get rejected. Number of complaints of Failed ATM Transactions is so large that banks do not have the time to see video recordings or talk to cash handling vendors to see any possibility of any fault or wrong doing somewhere. Consumer Courts or the Banking Ombudsman will find it hard to give any relief to the customers after seeing these documents. And in the absence of Reserve Bank of India guidelines on placement of security cameras or on preservation of recordings, banks get away easily just by saying that either the camera was not present or was not functioning or the recording was not available due to some technical fault.





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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.