Recently we saw that RBI came up with a circular (Refer TOI article here). RBI had in its earlier circulars (Refer here) starting from 1976 had indicated that the purpose of opening minor accounts was to encourage the habit of “Savings” at an early age. That was the time when there was no digital banking and not digital banking risks. The minors were allowed to open the account with the consent of the natural guardians and there was a limit to the transactions and no third party cheques could be issued. The minor could only come to the bank and withdraw or deposit the money.
Now the old guidelines are repealed and the new guidelines state that Banks are free to issue ATM/Debit Cards, Chequebook facility etc based on the risk management policy of the Banks. There is no limit on the balances.
In this context I want to ask the RBI officials including the Governor whether they are out of their minds? Are they aware of the Risks to Banking system because of this new grand gesture?
Today, Banks are no longer interested in promotion of “Savings”. They are as greedy as a commercial organization like Google or Meta or Amazon and today every account is seen as a profit center. They are also completely ignorant of the Banking law and through this circular RBI has also demonstrated that they donot respect Banking law.
I want to discuss here few specific issues for which I demand that RBI has to answer.
- Banks are ignorant of the Banking law and donot understand the Banking Customer relationship not the ITA 2000 while applying “Debit Freeze” and “KYC Freeze” on the accounts.
- Banks are not respecting the RBI’s own circular on “Zero Liability”
- Minor Accounts
Banker Customer Relationship
It is an age-old Banking law that recognizes the Banker-Customer relationship as a “Debtor-Creditor” relationship where a Bank is a debtor who has borrowed money from the depositor and has the power to use it as he decides. The depositor is not the owner of the money deposited and is only a creditor who can claim the money bank as per rules and if not returned can sue the Bank. Bank deposit is not “Property” and is not in the control of the depositor once it passes onto the control of the Bank.
As a result, whenever a Bank fraud takes place, the money lost is not that of the customer but is of the Bank. If a customer observes that money ahs vanished from his account, his right to withdraw has been curtailed and like filing a complainant of any cognizable offence is expected to report the crime.
The RBI has rightly held that if the customer disputes any debit the Bank is obliged to repay the same instantly.
Indus Ind Bank does not care for RBI Circular
I came across a case of Indus Ind Bank Thane Branch recently where I filed an e-mail complaint to Mr. Dickson Baptista , Head – Customer Care OPUS Center 47, Central Road, Opp. Tunga Paradise Hotel MIDC Andheri (East) Mumbai 400093 pointing out a customer’s dispute of two transactions which ought to be refunded. This email was sent on 8th April 2025 and there is no response till date.
I am charging the Bank of “Denial Of Access” under Section 43 of ITA 2000 and read with Section 66 of ITA 2000 it is a report of a crime.
Does RBI have any answer to the impunity with which Bank refuses to even acknowledge the e-mail?
Is this post which is a public notice not sufficient for the vigilance department of both Indus Ind Bank and RBI to seek action?… Let me see how they react.
I fought the case of S Umashankar Vs ICICI Bank for 14 years before got a refund from the bank for a phishing fraud where Mr Umashankar was a victim. After the Zero liability circular came into effect many cases might have been settled without such a dispute resolution going through Adjudication, Appellate Tribunal and the Courts. But still there are many Banks who consider that their Fraud Customer is more valuable than the Victim customer and try to protect and shield the fraud by making it difficult for the victims to recover their losses.
Debit Freeze
In the above case of Indus Ind Bank, while the Bank has not acted on the refund of the disputed transactions, they have put a debit freeze on the balance. What should we say on the intelligence of the Indus Ind Bank to have considered that the victim should be further inconvenienced by such a debit freeze on the balance remaining after the fraudsters have withdrawn part of the money? (In the Umashankar case I did not have the problem since the fraudster had cleaned out the entire account)
I now ask the RBI whether their “Debit Freeze” applies to the balance remaining in an account where some fraudulent debits have occurred. If Banks are allowed to get away unpunished for this action, there will be a chilling effect on Cyber Crime victims and they will be hesitant to report frauds. As it is we the consultants tell victims that if the amount lost is small, then forget it since Police donot have time. Now we need to even consider that if there is a balance of one lakh in my account and there is a UPI fraud and there is a fraudulent debit of Rs 1000 and I report it to the Bank, Bank may classify the account as “Involved in a Cyber Crime and put a debit freeze.
Is RBI aware of this possibility? Will it take any action?
The debit freeze is defended under Section 106 of Bharatiya Nagarika Suraksha Samhita 2023 (BNSS 2023) as the power to seize “Property” .
In the context of the “Banker Customer Relationship” does the “Bank Balance” represent “Property”? What we claim today as “My Bank Balance”, is it not a “Right to withdraw money lent to the Bank”? Is it not an “Actionable Claim”. Is this not the argument under which Banks some times refuse premature closure of deposits even when the Bank is considered an insolvency risk?
Now in the case of digital banking, how can the binaries that show up on my computer withing the banking application as “Balance” be considered as “Property”?
If there is a debit freeze, the debit freeze is legally treated as “Denial of Access” which is an offence under Section 66 of ITA 2000.
Neither the RBI nor a Police officer wrongly using Section 106 of BNSS can cause denial of access under an excuse that he is trying to investigate a crime.
I want the Ministry of Home Affairs to confirm if this is part of the “Nagarika Suraksh” that they want to achieve under the new Act? Is it not a “Police Excess” using powers to investigate the criminal being applied to harass the victim?
I want lawyers who are fighting such cases to argue this with the Courts since even Courts have forgotten the concept of “Debtor-Creditor” relationship and make police, Banks and RBI answerable to the harassment that is going on in the name of Cyber Crime prevention?
The same denial of access charge is also applicable when Banks put a debit freeze on accounts for non updation of KYC which is randomly asked by the Bank from time to time. Banks think “Know Your Customer” is not satisfied when they “Know the Customer” in one account but not in “Another Account” and request multiple documentation for the same customer. The non Banking REs like the payment gateways also have their own ignorance and often refuse to update KYC for companies for lack of Aadhaar of a company.
I recently had an observation that my account with ICICI Bank in the Bengaluru urban area was inoperative for KYC non updation for more than 15 days and even after updation of the KYC, the papers remained in the drawers of an ignorant staff who had no clue to what is KYC. The manager confessed that the quality of staff are today so inadequate that it is difficult to get work done by them. In our times it was difficult to get work done by Bank staff because of Union problems but today it is the lack of awareness that is hurting the Bankers.
The MeitY/Ministry of Finance have their own share of ignorance when they declare such Banks as “Protected Systems under Section 70 of ITA 2000” and “Too Big to fail”.?
Is Meity imposing the restrictions envisaged under Protected System Security on Banks like ICICI Bank, HDFC Bank, Union Bank etc whom they have royally declared as “Protected Systems” as if it is a feather in their cap.
Minor Account
At this point of time what on earth makes RBI think that Bankers are capable of handing the “Minor’s” account in digital form?
As per the latest RBI circular, if Minors are allowed to issue cheques to third parties, what will be the impact on the rights of the beneficiary of the cheque? or more importantly the endorsee of the Cheque who is a “Holder in Due Course”? How will Courts determine the liability of the drawer of the cheque under Section 138?
Similarly since there is no upper limit on the balances on these accounts, are these minors not exposed to Cyber Frauds and Digital Arrest frauds? Will RBI take responsibility when some minors either commit suicides or start stealing from their own parents on the basis of teachings by fraudsters?
In Kannada there is a proverb “ಬೇಲಿಯೇ ಎದ್ದು ಹೊಲ ಮೈದರೆ ಕೇಳೋರ್ಯಾರು?” ( BEliye edhdhu hola maidare KEloryaru?) meaning: who will listen when the fence itself eats the crop?
Currently RBI has allowed “Freezing of Bank accounts” which itself is illegal. It is allowing Minor accounts which is illegal. Banks continue to support fraudster customers against victim customers. Police not Courts come to assist the victims and they are more concerned with their own interests. Even Supreme Court is supporting the Bitcoins and fraudulent Judges instead of the innocent citizens.
The situation has become so bad today that fraudsters are using this as a threat to genuine customers to say ” I will get your account frozen if you donot do this…”. A threat of this nature was received by a professor in Bangalore recently. This was a case where an unknown person had called and said I have wrongly credited some amount to your account and you should transfer it back. As most of us know this is one of the standard modus operandi for UPI frauds and the alleged recipient is advised not to act on such requests. In this case when the account holder has refused to talk to the person, he has threatened that he will get the account frozen.
We all know that these criminals have their supporters even in the Police Stations and it is not difficult to get a letter issued to the Bank for freezing the account. The Police should not have the power to issue such “Garnishee” orders in the first place and neither the RBI nor the Bank seem to mind. The Ministry of Home Affairs also does not mind such illegal practices.
How will RBI react to this new “Weaponization of debit freeze” by fraudsters?
I have been an ex-Banker and am aware that once the power to freeze bank accounts were only through “Garnishee Orders” from a Court. Today such powers are being exercised by all law enforcement agencies including a Police inspector and is therefore amenable for abuse. I refer to an article in manupatra which speaks of the Section 102 of CrPC or 106 of Bharatiya Nagarika Suraksha Samhita which states as under
106. Power of police officer to seize certain property.
(1)Any police officer may seize any property which may be alleged or suspected to have been stolen, or which may be found under circumstances which create suspicion of the commission of any offence.(2)Such police officer, if subordinate to the officer in charge of a police station, shall forthwith report the seizure to that officer.(3)Every police officer acting under sub-section (1) shall forthwith report the seizure to the Magistrate having jurisdiction and where the property seized is such that it cannot be conveniently transported to the Court, or where there is difficulty in securing proper accommodation for the custody of such property, or where the continued retention of the property in police custody may not be considered necessary for the purpose of investigation, he may give custody thereof to any person on his executing a bond undertaking to produce the property before the Court as and when required and to give effect to the further orders of the Court as to the disposal of the same:Provided that where the property seized under sub-section (1) is subject to speedy and natural decay and if the person entitled to the possession of such property is unknown or absent and the value of such property is less than five hundred rupees, it may forthwith be sold by auction under the orders of the Superintendent of Police and the provisions of sections 503 and 504 shall, as nearly as may be practicable, apply to the net proceeds of such sale.
It is clear that this section will hold only if we accept that Bank Balance in digital form is “Property”. I think this is not feasible unless the Courts forget the nature of Banker Customer relationship and treat it not as Debtor-Creditor relationship but as Bailor-Bailee relationship.
Concluding Remarks
It is a pain to attack several Government agencies in this one blog and watch the deterioration of RBI and Banks to a state that customers are the last of their priorities. I have in the past appreciated RBI for some of their bold stand against Bitcoin as well as the Zero liability circular. But it seems that the management has now changed and the new crop of Governors and Deputy Governors are not committed to the principles under which RBI was functioning so far. It is necessary for them to be reminded of the reports of the SR Mittal working group, Gopala Krishna working group and Damodaran Committee which appear to be a past golden era in Indian Banking.
The current generation of the society need to think Banking as “E Commerce” and either spread their risks or disable internet Banking in most of their accounts. In today’s regulatory scenario in Banking I am afraid that we are not ready for he “UPI Revolution”.
If there are any genuine souls in RBI who still respect the Banking customer, I want them to respond to the concerns expressed here. Minimum restrictions suggested to be mandated by RBI are:
- Limit the balance to a maximum of Rs 25000/-
- Cheques to be pre-printed as “Self Cheques,Not to be endorsed” and “Minor Account”
- No RTGS, NEFT, IMPS or UPI
- Debit card drawing limit fixed at Rs 5000/- per day
Naavi
