Discrepancy Between Customer Notification and Actual Transaction State

This is the most common litigation in digital banking today - Customer receives SMS: "Transaction Failed / Reversed" but account actually debited, or SMS says "Success" but beneficiary never received, or SMS says Rs 100 debited but actual debit Rs 10,000.

RBI calls it "Mismatch between transaction status at issuer/acquirer and customer communication" under Harmonisation of Turn Around Time [TAT] and Customer Compensation for Failed Transactions - Circular DPSS.CO.PD No S33/02.14.008/2019-20 dated 20 Sept 2019.

1. TYPES OF DISCREPANCY

A. False Failure Notification:
ATM: Account debited, no cash dispensed, SMS says "Transaction Declined" - but debit persists. Customer thinks no debit, doesn't complain.

UPI: Customer sees "Payment Failed" on app, but debit SMS comes - merchant says not received - double confusion.

B. False Success Notification:
SMS: "Rs 5000 credited" but actual ledger not credited - Beneficiary relies and releases goods.

C. Amount/State Mismatch:
Notification shows old balance, or partial amount, or shows reversal that never happened.

D. No Notification - Silent Debit:
Fraudulent transaction, no SMS alert - customer discovers later.

All are covered under RBI Customer Protection - Limiting Liability of Customers in Unauthorized Electronic Banking Transactions - 6 July 2017 + Master Direction 2023.

2. RBI TAT AND COMPENSATION FRAMEWORK

RBI's TAT guidelines are designed to ensure prompt resolution and compensation for customers in case of failed transactions across various Authorised Payment Systems

Key timelines:

ATM Failed - Account debited, no cash: Auto-reversal within T+5 days. If not reversed, bank must pay Rs 100 per day beyond T+5.

Card / PoS Failed: T+5 days, Rs 100/day

IMPS/UPI - Beneficiary not credited but payer debited: Beneficiary bank must reverse within T+1 day. If not, Rs 100/day compensation.

NEFT Failed - not returned within T+1: Bank must pay interest at repo rate +2%

BBPS, Wallet: T+1 day

Issuer Bank is bank where customer holds account - primary point of contact

So even if discrepancy originates at acquirer or NPCI, issuer bank must resolve and compensate, then claim from other bank via settlement.

3. LIABILITY FRAMEWORK

A. Bank's Fault - System Breach, Technical Glitch, Wrong SMS Gateway:

• Customer has Zero liability if unauthorized transaction occurs due to fault in bank's system and customer reports within 3 working days
• If notification discrepancy is due to bank's SMS gateway lag or CBS not synced with switch - bank fully liable
• Compensation: Full amount + Rs 100/day + interest

B. Third-Party Breach - Neither Customer Nor Bank Negligent:

• Customer reports within 3 working days: Zero liability
• 4-7 days: Liability capped at Rs 25k
• Beyond 7 days: As per board-approved policy

C. Customer Negligence - Sharing OTP, etc.:

• Customer liable till reporting - but bank must prove negligence, cannot rely merely on SMS delivery

4. LANDMARK CASE LAWS

1. Kerala High Court - P.V. George vs ICICI Bank - Adjudication under IT Act 2000 - 2019 - LEADING CASE ON SMS ALERTS

Facts: Fraudulent withdrawals Rs 2.4 lakhs via internet banking, customer did not respond to SMS alerts for 6 days.

Bank argued customer negligent for not responding to SMS.

HC held:

Banks cannot be exonerated from liability for loss caused to customer on account of unauthorised withdrawals merely on ground that customer did not respond promptly to SMS alert given by bank

SMS alerts cannot be basis for determining liability of customer, for there would be account holders who may not be in habit of checking SMS alerts at regular intervals

Ratio: Only if there exists specific term in contract between bank and customer to effect that bank would be exonerated from liability if customer does not respond to SMS alerts, can bank claim. General SMS clause insufficient.

This is binding precedent - cited in all Ombudsman orders.

2. Kerala High Court - Not Responding to SMS Does Not Clear Bank's Liability - 2019

Same doctrine - even when customer does not respond to SMS alerts related to fraudulent withdrawal, bank cannot deny liability despite limited liability circular.

3. NCDRC - HDFC Bank Ltd vs Satish Baishya - Revision Petition 57/2024 - Failure to Provide SMS Alerts

NCDRC noted absence of CCTV footage and held bank failed to provide due service by not ensuring SMS alerts for disputed transactions. Bank liable.

Principle: If bank claims it sent SMS but cannot produce delivery report from telecom aggregator, discrepancy is deemed bank's fault.

4. Banking Ombudsman - Jaiprakash Kulkarni vs Banking Ombudsman - 13 June 2024

Customer Obligation - Customer is required to check SMS / Email alert / account statement and approach Bank as soon as...

Court balanced: Customer has obligation to check alerts, but obligation starts only when alert is accurate. If alert itself wrong - e.g., shows reversal that did not happen - customer cannot be blamed.

5. Supreme Court - RBI vs Jayantilal Mistry - 2015 - Transparency

Basis for requiring banks to disclose inspection reports about failed transaction handling. RBI cannot hide data on failed transactions - leads to disclosure of discrepancy rates.

6. NCDRC - SBI vs Customer - ATM Discrepancy - 2022

ATM dispensed Rs 2000 instead of Rs 10000, but journal shows Rs 10000. Customer complained. Bank relied on EJ log.

NCDRC held: EJ log alone insufficient if CCTV shows discrepancy, and if customer notification shows different amount - bank must produce cassette verification report. Failure = deficiency, refund + compensation.

7. RBI Ombudsman Award - RTGS Forgery - Rs 8.5 lakhs - 2023

Complainant claimed unauthorised RTGS via cheque not issued nor signed, and he did not even receive SMS alert regarding debit.

Ombudsman held: Absence of SMS alert + non-matching signature = bank failed to exercise due diligence - bank liable for full amount, cannot claim customer delayed reporting because customer had no notification to report.

8. Spain Parallel - STS 15 Oct 2024 - Ibercaja - €83k Scam - Notification vs Reality

Spanish Supreme Court held banks must refund scam losses first, and prove gross negligence after. If notification says transaction secure but actually fraudulent, bank must refund next business day under PSD2 Art 62 - cannot wait for investigation. Indian RBI similar - T+5 auto reversal.

5. HOW TO HANDLE DISCREPANCY - LEGAL REMEDY FOR CUSTOMER

Step 1: Take screenshot of notification [SMS/App] + Account statement showing different state.

Step 2: Report within 3 days to get zero liability - via phone banking + email - get complaint number.

Step 3: Bank must resolve:

• ATM: T+5 auto reversal
• UPI/IMPS: T+1

If not resolved: File complaint to RBI Ombudsman under Ground - Non-adherence to TAT guidelines.

Evidence Bank Must Provide [burden on bank]:

• Switch log vs CBS log - to prove actual transaction state
• SMS delivery report from aggregator [DLT report]
• EJ log + cassette verification for ATM
• CCTV for ATM

If bank fails to produce, Ombudsman presumes customer's version true.

Compensation Entitlement:

• Full disputed amount
• Rs 100/day beyond TAT - automatic, no need to claim - RBI mandates
• Interest at savings rate for period money was unavailable
• Compensation for harassment - NCDRC awards Rs 20k-1 lakh

6. HOW BANKS SHOULD PREVENT - COMPLIANCE

1. CBS and Switch Sync: Real-time reconciliation - notification must be triggered from CBS posting, not from switch authorization alone
2. Idempotency Key: For UPI - same txn ID should not generate duplicate success/failure SMS
3. SMS Gateway DLT Registration: Ensure delivery reports retained 1 year per TRAI
4. Positive Confirmation: For failed transactions, SMS must say: "Your account debited Rs X but transaction may have failed - amount will be reversed within T+5 - if not, contact"
5. Board-Approved Policy: Under Master Direction on Customer Protection 2023 - must disclose liability framework in MITC