Are banks legally liable for fraud done by their employees on customers?

The Supreme Court of India, in a recent case (April 2024), upheld a bank’s liability for the acts of its employees in a case where the Employee Software fraudulently withheld the amount from depositing in the customer’s FD account. “As per the Apex Court, such acts (frauds) of employees, when done during their course of employment, are binding on the bank and will give customers a right to legally proceed against the bank for loss or damage. In most cases, Employee Software it would be the only effective remedy available to the customers. However, the bank’s liability may be limited in cases where the customer has shared his password, PIN, OTP, etc., with the bank employee,” says Suma R V, Partner, King Stubb & Kasiva, Advocates and Attorneys.

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