UK banks’ operations in disarray: Are we prepared for such goof-ups here?

The RBI should also implement measures to avoid UK-like incidents happening here

More than 12 million bank customers in the UK were in for a surprise last week when they found that they could not operate their accounts due to malfunctioning of banks’ software, resulting in a chaos at National Westminster Bank, one of the country’s biggest banks. As per reports, the problem arose when their technology staff was in the process of installing an upgradation to their payment processing system but resulted in corrupting the entire system that prevented their customers from accessing their accounts for as many as four days. This problem spread to two other banks, namely Royal Bank of Scotland and Ulster Bank, who are all part of the same group of the Royal Bank of Scotland.

As per PTI reports, many of the customers of these banks have been unable to pay their bills and are now likely to face penalties for missing the payment. The banking group has, however, assured that none of their customers will suffer monetary loss as a result of this problem, and banks are expected to come back to normalcy during this week.
Surprisingly, it is not clear as to why these banks which were affected by the software problem have not been able to make use of their disaster recovery set up, unless they had resorted to upgrade their entire technology set up at one go, putting at risk the normal functioning of the banks’ operations for a number of days.

Nearer home, a similar problem, though on a much smaller scale, happened at Axis Bank, one of the major private sector banks in our country, two years back when they were upgrading their software and the branches of this bank were unable to update the pass books of account holders for a number of days. This resulted in some of the customers of the bank voicing their concern to its technology partner, Infosys Technologies during the annual general meeting, as the bank had put the blame on the IT company for the glitch in their software.  

There is a lesson to be learnt from this incident for the banks in India, too. Almost all our banks are now on core banking solutions (CBS) and improvements in technology are happening every day. It is, therefore, possible that such situations may arise here anytime in the future and banks should guard against such mishaps occurring due to lack of knowledge on the part of staff concerned.  

The second incidence of a bank mishap that was reported in UK last week was in respect of malfunctioning of an ATM located outside a super market called Sainsbury’s in Central London. Luckily for bank’s customers it was case of an ATM dispensing double the money requested for by the customer, debiting only 50% of the money disbursed to the account of the card holder. There was virtual run on the machine, when it started paying double the amount and people started queuing up to benefit from this largesse. Many customers walked away hundreds of pounds richer after withdrawing the maximum of 300 pounds on multiple cards to beat the restriction on withdrawing from a single card.

As per PTI  reports, this bonanza to customers happened because of an error committed by the employee of the bank, who loaded the 10 pounds tray with 20 pound notes by mistake. The ATM was finally closed down when a customer reported the matter to the supermarket.

In 2008, Sainsbury's was the focus of another similar incident when customers of their local store in Hull realised the ATM outside was giving out twice the requested withdrawal.

The question being asked is what you should do when you receive excess cash from an ATM. As per the opinion of a practicing lawyer in UK as reported in the media, the position is pretty clear that the excess money does not belong to the bank’s customer. The 1968 Theft Act of England says, “A person is guilty of theft if he dishonestly appropriates property belonging to another with the intention permanently depriving the other of it.” So the best course of action in terms of law is to report it straightaway to the bank and surrender the excess cash against an acknowledgment, It is the only way you can preserve your position, but if you sit on it and wait for the bank to find you, your position becomes a lot weaker, says the lawyer.  

Despite this stated position, on previous occasions when such mistakes happened, some banks in the UK have reportedly chosen to write off the losses rather than pursue a large number of claims.

Our experience in India so far is exactly opposite of what happened in UK. We have a large number of instances where the ATMs have failed to dispense cash but no instances of excess cash being disbursed have come to our notice so far. The Reserve Bank of India (RBI) has, therefore, come out with guidelines to be followed by banks when their ATMs fail to dispense cash to the customer, even after the requested withdrawal amount gets debited to the customer’s account.

As per RBI directions, with effect from 1 July 2011, the bank is bound to reimburse the amount not disbursed or short disbursed by ATM on verification within seven working days from the date of customer’s complaint, failing which the card issuing bank should pay to the customer in addition to the claimed amount, a penalty at the rate of Rs100 per every day’s delay.  However, the customer is entitled for such compensation for the delay only if a claim is lodged with the card issuing bank within 30 days of the failed transaction.


But as there are no reports of ATMs dispensing excess cash here, the RBI has not come out with any guidelines in this regard. But in all fairness and equity, the customer should refund the excess amount to the bank without asking and this could be the norm if such a thing should happen in India. For the sake of clarity and avoidance of any doubt, the RBI should come out with guidelines in this regard also as such instances of dispensing excess cash cannot be ruled out here in the wake of growing number ATMs and the proposed introduction of white label ATMs shortly.

(The author is a banking analyst. He writes for Moneylife under the pen-name ‘Gurpur’)

Comments
a v moorthi besides TIHAR
1 decade ago
recently when data centre of PNB at New Delhi was affected in a fire accident their branch operations across India came to stand still for 3-4 days because their IT team had not bothered to conduct drills on regular intervals to check whether branches were able to access server at DR Site when data centre fails and whether the infrastructure systems like LL Connectivity is working.

another issue is CBI is issuing Non Personalised Mastero cards without CVV number. Without CVV card cannot be used for inline booking of train tickets in irctc. but MTNL allows payment of bills by the very same card when Master card secure code is registered for the non CVV card and fed while paying MTNL bill. So "Gurpur" may thro some light on this ? as CBI was unable to throw more light on this
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