HC Slams Citibank and RBI Ombudsman for Mishandling Credit Card Fraud Case; Orders Rs. 1 Lakh Compensation to Victim

The petitioner, an advocate in Delhi, found himself battling an unexpected credit card fraud in April 2022 when Citibank issued him a second credit card without request, and, within a day, a fraudulent Paytm “rent payment” of Rs. 76,777/- was charged. He immediately raised complaints with Citibank and the Cyber Cell. Although the bank initially gave a provisional credit, it later reversed it, closed his complaint citing alleged use of OTP/IPIN credentials, and began billing him for the disputed transaction along with interest and penalty.

The petitioner approached the RBI Ombudsman, who rejected both his complaints. Meanwhile, Citibank continued issuing demand notices, making repeated calls, and even sent a recovery agent to his residence despite an interim “no coercive steps” order from the Delhi High Court. The petitioner then moved a contempt petition, after which Citibank reversed all charges and apologized, but several serious issues remained for the court to examine.

Issue Raised: Whether Citibank’s handling of the fraudulent transaction and RBI Ombudsman’s mechanised rejection of complaints violated the petitioner’s rights, and what systemic safeguards are required to protect consumers from harassment and ineffective grievance redressal in cases of unauthorised electronic banking transactions.

The Court noted that although the exact factual matrix surrounding the change of mobile number and OTP usage could not be conclusively analysed in a writ proceeding, Citibank’s conduct was unacceptable. The Court held that customers who fall victim to fraudulent transactions must not be further harassed through late fee charges, unresponsive helplines, or opaque communication channels. Since Citibank had already re-credited the disputed amount and reversed charges, the Court directed that the petitioner must not be billed any amount relating to the fraudulent transaction and that his CIBIL score must be restored.

The Court criticised of the RBI Ombudsman’s automatic, technical rejection of complaints, observing that such a process defeats the very purpose of consumer redressal. It issued a series of directions to RBI, including mandatory human oversight before final rejection of complaints, strengthening Ombudsman staffing, requiring banks to publish clear complaint escalation flowcharts, and ensuring accountability in bank communications. Citibank was also directed to pay Rs. 1 lakh as compensation for the harassment caused by its recovery agents. RBI was asked to file an affidavit by 15 January 2026 detailing steps taken to comply.

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