Tit for TAT: Lenders seek reset of compensation rules on ATM fraud
New Delhi: While AI-driven forgeries and cybercrime grow more sophisticated, banks are being tripped up by ATM power-off fraud, which has emerged as a leading concern and cause for dispute.
Banks have now flagged this to the Reserve Bank of India, or RBI, seeking a change in compensation guidelines, said people familiar with the developments.
"As of now there are no clear guidelines distinguishing between failed transactions and suspected failed transactions. We have made a case for a clear distinction in the compensation process so that banks do not end up paying for fraudulent transactions," said a bank executive, requesting anonymity.
ATM power-off fraud occurs when a fraudster cuts power to an ATM during a withdrawal, causing the system to record the transaction as failed even though cash is dispensed. The fraudster collects the money and later claims the amount was debited but not received.
Under the existing regulations, banks pay compensation to customers in accordance with the Harmonisation of Turn Around Time (TAT) for failed transactions using authorised Payment Systems.
"We have submitted that suspected power-off failed ATM transactions be considered for exclusion from automatic compensation eligibility to discourage fraudulent behaviour and misuses of the compensation framework," said another bank executive.
As per the harmonisation of TAT, a 'failed transaction' is a transaction that has not been fully completed for any reason not attributable to the customer, such as communication link failures, ATM cash unavailability, and session timeouts.
"In many states, including Maharashtra and Delhi, payment solution providers have filed such complaints with police," said an industry executive, noting that in Pune there was a complaint filed that almost ₹2 crore were syphoned off from 50 ATMs of a leading national bank.
In 2025, the Supreme Court in a judgement had stated that it is not mandatory for banks to place security guards round-the-clock at all ATMs.
Banks have now flagged this to the Reserve Bank of India, or RBI, seeking a change in compensation guidelines, said people familiar with the developments.
"As of now there are no clear guidelines distinguishing between failed transactions and suspected failed transactions. We have made a case for a clear distinction in the compensation process so that banks do not end up paying for fraudulent transactions," said a bank executive, requesting anonymity.
ATM power-off fraud occurs when a fraudster cuts power to an ATM during a withdrawal, causing the system to record the transaction as failed even though cash is dispensed. The fraudster collects the money and later claims the amount was debited but not received.
Under the existing regulations, banks pay compensation to customers in accordance with the Harmonisation of Turn Around Time (TAT) for failed transactions using authorised Payment Systems.
"We have submitted that suspected power-off failed ATM transactions be considered for exclusion from automatic compensation eligibility to discourage fraudulent behaviour and misuses of the compensation framework," said another bank executive.
As per the harmonisation of TAT, a 'failed transaction' is a transaction that has not been fully completed for any reason not attributable to the customer, such as communication link failures, ATM cash unavailability, and session timeouts.
"In many states, including Maharashtra and Delhi, payment solution providers have filed such complaints with police," said an industry executive, noting that in Pune there was a complaint filed that almost ₹2 crore were syphoned off from 50 ATMs of a leading national bank.
In 2025, the Supreme Court in a judgement had stated that it is not mandatory for banks to place security guards round-the-clock at all ATMs.
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