Banks should not commit blunders

Pushpa Girimaji
Pushpa Girimaji

THE other day I called up my bank to check the exact balance in my account. The response gave me a real jolt. Even as my mind began to work out the course of action that I needed to take to counter the fraud, I asked the bank official to re-check the numbers. This time, he apologised and said he had misread the numbers and gave me the correct amount.

How can someone working in a bank commit such a blunder, I asked in anger. But the reality is that banks do make such mistakes, and even dishonour cheques of customers on the basis of such errors. Ask for an explanation and they quote Alexander Pope to you : "To err is human, to forgive, divine."

But in a banking transaction, bank officials cannot afford to err. Imagine the embarrassment such a dishonour will cause you. If you have started a new business venture and have issued the cheque to a supplier, it will completely mar your reputation and adversely affect your business. Or if the cheque is towards payment of a credit card bill or repayment of a loan, you will not only end up paying a hefty interest on the amount due, but may well get a poor credit rating.

If the cheque is meant to pay for an insurance premium, it may well lead to dire consequences. It is no wonder that in many such cases, the victims have approached the consumer court for compensation. But in most cases, the compensation awarded has not been large enough to impact the wrong-doer. But last month, the court shed its normal tendency to go all miserly on the compensation and awarded a decent amount to a client. In this case, Sohan Lal Bance, an NRI , had issued a cheque in favour of Ms Ravi Lal for Rs 98,500, after ascertaining that there was sufficient balance in his Indian account. However, the bank dishonoured the cheque, claiming insufficient funds in the account. Subsequently, it admitted that it was a mistake and promised to encash the cheque. However, the second time, too, the bank failed to honour its commitment. But it promptly debited the amount of the cheque from the customerís account along with a hefty transaction fee.

Two years later, during a visit to India, when Ms Lal humiliated and insulted him for issuing a worthless cheque, Bance was taken aback. Following his complaints, the bank reversed the entries and paid interest on the amount, but the consumer was determined to make the bank pay for its sheer carelessness.

The national commission rejected his plea for compensation to cover two trips to India and his stay at a hotel to sort out the problem with the bank. However, it felt that the complainant had to be adequately compensated for the repeated deficiency on the part of the bank, which it said amounted to "gross deficiency." It, therefore, awarded a compensation of Rs 1 lakh (Sohan Lal Bance vs Citibank NA, RP No 2350 of 2006, decided on July 20, 2010).

Another order worth mentioning in this context was delivered two years ago, when the national commission resorted to a provision in the Consumer Protection Act that it uses very sparingly, and directed a bank to pay punitive damages. In this case, a cheque issued by the Bihar State Sugar Corporation towards an insurance premium to cover the assets of Lauriya Sugar Factory against risks had been dishonoured by the bank, despite sufficient funds in the account.

As a result, the policy had not come into existence at all. Here, taking into consideration the gravity of the mistake committed by the bank, the national commission said it should not go unpunished. It, therefore, directed the bank to pay Rs 5 lakh as punitive damage (Bihar State Sugar Corporation Ltd vs State Bank of India, OP No 284 of 1997, decided on 5-12-2006).

The banking regulator should send both these orders to all banks and warn them of the consequences of such negligent action as dishonouring cheques without cause.