The Kerala High Court has directed the State Bank of India (SBI) to compensate a retired college principal for ₹3.73 lakh lost through unauthorised electronic transactions. Justice Harisankar V. Menon held that the case fell within the customer-protection provisions of the Reserve Bank of India’s (RBI) circular on unauthorised banking transactions.
The Court set aside the Banking Ombudsman’s order rejecting her complaint and directed SBI to make good the entire loss within four weeks.
Background
The petitioner, Remadevi T.L., a retired principal of Pazhassi Raja NSS College, maintained a savings account with SBI. On July 13, 2019, she received a message stating that her debit card was to be blocked, followed by a telephone call asking her to provide an OTP to reactivate banking services through the State Bank Secure App.
After sharing the OTP, ₹3.73 lakh was debited from her account. She immediately contacted the bank’s customer care service, and the incident was reported to the police. The investigation report identified a person who allegedly used the information to create four Spice Digital wallets and transfer the money.
When the amount was not refunded, she approached the Banking Ombudsman. After an earlier order was set aside and the matter was reconsidered, the Ombudsman again rejected her complaint. She then challenged that decision before the High Court.
The principal issue was whether the petitioner’s case involved customer negligence under Clause 7(i) of the RBI circular or a third-party breach covered by Clause 6(ii), which provides for zero liability when the prescribed conditions are satisfied.
The Court noted that the petitioner had promptly reported the fraudulent transactions, but the bank had not taken steps to restore the amount. It also observed that the petitioner’s account of how the fraud occurred had not been specifically denied in the bank’s counter-affidavit.
Referring to a similar decision of the Gauhati High Court, which the Supreme Court had declined to interfere with, Justice Menon considered the distinction between sharing an OTP under deception and being responsible for the resulting unauthorised transactions.
The judgment emphasised the importance of establishing customer negligence through the available evidence rather than merely alleging it.
The Court also referred to the Supreme Court’s observations on the respective responsibilities of banks and account holders:
“The Bank should remain vigilant. The Bank has the best of the technology available today to detect and prevent such unauthorized and fraudulent transaction.”
The Supreme Court had also stressed that customers must exercise caution when handling OTPs. However, in the present case, the High Court found that the material on record supported the petitioner’s claim that she was not involved in the fraud.
Justice Harisankar V. Menon held that the petitioner’s case was covered by Clause 6(ii) of the RBI circular and the principles recognised in the Gauhati High Court judgment.
The Kerala High Court accordingly set aside the Banking Ombudsman’s order and directed SBI to compensate Remadevi T.L. for the loss of ₹3,73,000 as stipulated under the RBI circular.
The bank was directed to comply as expeditiously as possible and, in any event, within four weeks.
Case Details
- Case Title: Remadevi T.L. v. Reserve Bank of India & Others
- Case Number: W.P.(C) No. 28970 of 2021
- Judge: Justice Harisankar V. Menon
- Decision Date: October 5, 2026
