SBI's unethical handling of a fraud complaint cost a retired Wing Commander his credit score—Telangana Consumer Commission steps in with strict orders.
Hyderabad: Telangana State Consumer Disputes Redressal Commission (TSCDRC) has upheld a district panel’s direction to State Bank of India (SBI) to pay Rs 8 lakh in compensation to a former IAF official, Wing Commander Yella Prakash Rao (retd).
The bank, following Wg Cmdr Rao’s complaint of fraudulent debit card transactions by unknown persons, created a ‘shadow loan account’ that ultimately affected his credit scores.
The incident took place in 2014 when Wg Cmdr Rao, who was in Mumbai discovered fraudulent transactions worth Rs 1,85,658.19 on his SBI debit card made in Canada. After initially resisting, the SBI Alwal branch refunded the amount. However, instead of direct credit, SBI created a ‘shadow loan account’ (an account outside an official account) for the same amount.
SBI’s explanation was that it was a precautionary measure. The bank stated that it was created as a loan account to ensure that if the police recovered the fraudulently withdrawn funds, the complainant would refund the amount to the bank. The bank claimed that the then-branch manager took an undertaking from the complainant. The Consumer Commission has stated that no such undertaking was provided.
This shadow loan account negatively impacted Wg Cmdr Rao’s CIBIL score, which led to the rejection of credit card applications, hindered him from obtaining an educational loan for his son and caused him mental distress. Despite repeated follow-ups, SBI did not close the shadow loan account. The commission called SBI’s actions “unethical and callous,” stressing that "no amount of compensation can be termed as sufficient for the extremities suffered" by the complainant.
The district commission directed the bank to pay an amount of Rs 8 lakh to the complainant towards compensation and to pay an amount of Rs 50,000 towards the costs of litigation.
