Kerala High Court orders SBI to refund Rs 3.73 lakh to fraud victim who shared an OTP
According to Livemint, citing a report in The Indian Express, the Kerala High Court has directed the State Bank of India to refund Rs 3.73 lakh to a retired college principal after an unauthorised transaction on her debit card. She had received an SMS warning that her card would soon be blocked, followed by a call from an official-looking number offering reactivation. Trusting the caller, she shared an OTP (one-time password) for the 'registration' of a purported SBI Secure App, and Rs 3.73 lakh left her account. The court held that the case fell under the RBI's 'zero-liability' provision, which the report describes as covering certain unauthorised transactions involving a third-party breach where neither the bank nor the customer is at fault. The surprise is in the outcome. Sharing an OTP did not, in this case, put the loss on the customer.
What this means
The mechanism is the RBI's zero-liability provision. As described in the report, it applies to certain unauthorised transactions caused by a third-party breach where neither bank nor customer is at fault, provided the customer notifies the bank within three working days of receiving communication about the transaction. The people most directly affected are customers targeted by impersonation scams, in which fraudsters pose as bank, ED, RBI or police officials and use fear and urgency to extract OTPs, CVVs or PINs. For banks, the ruling shows that a customer having handed over an OTP may not, on its own, settle who bears the loss. The facts and the timing of the complaint matter. Bankers should watch whether similar claims cite this judgment, and should check that complaint logs, alert records and reporting timestamps can show clearly when a customer flagged a fraud.
Most affected: Retail banking fraud and grievance desks
Key takeaway: Make sure branch and customer-care staff log the exact time a customer reports a fraud and point them to the bank's official channels, since the three-working-day notification window can decide who bears the loss.
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