January 24, Mumbai: An order passed on Tuesday, Parrag Jaiin Nainutia, principal secretary of the department of information technology for Maharashtra (adjudicating authority under the IT Act), says, “In my considered view, Axis Bank’s failure to ensure reasonable security practices and procedures, as mandated under Section 43A of the IT Act directly contributed to the unauthorized transactions.
The hacking of its systems, as admitted in the first information report (FIR), indicates a lapse in implementing adequate measures to protect sensitive customer data. Section 43A imposes liability on entities that handle sensitive personal data and fail to maintain reasonable security safeguards, resulting in wrongful loss or damage. In this case, Axis Bank’s negligence in securing its systems led to the compromise of the complainant’s confidential information and subsequent fraudulent transactions.”
Additionally, the absence of robust real-time monitoring and fraud detection mechanisms underscores Axis Bank’s failure to comply with the prescribed standards for data protection and security under the IT Act and Reserve Bank of India (RBI) guidelines. This lack of vigilance not only facilitated the unauthorized transactions but also caused immense financial and reputational harm to the complainant, highlighting the bank’s non-compliance with statutory obligations,” the AA says in the order.
Under this Act, the state IT secretary is the adjudicating authority who can adjudicate cyber fraud matters in which the claim for damage does not exceed Rs5 crore. The AA has the powers of a civil court.
Mr Nainutia, the principal secretary of IT, also noted that “the transaction conducted on 7 June 2020 occurred on a Sunday, which was a bank holiday, directly contradicting the statements made by Axis Bank.”
Holding Axis Bank responsible for the unauthorized transactions, the AA directed the lender to reimburse the actual loss of Rs1.76 crore with 18% interest and pay compensation of Rs50 lakh and Rs3 lakh as legal charges to Dhule Vikas Sahakari Bank.
For more updates subscribe to questiqa.in and questiqa.com
