The Bankwatch

Tracking the consumer evolution of financial services

Cash retraction at ATM produced a new fraud type for Indian Banks

Indian banks have had  to turn off an ATM cash retraction facility.  This facility meant that cash not picked up by the customer after 10-15 seconds was sucked back into the ATM and the customers account was credited again.

Bank ATMs stop sucking in cash after RBI direction | Financial Express India

New Delhi : Next time you go to an ATM to withdraw cash, don’t worry about the banknotes getting sucked back by the machine if not collected immediately, as RBI has asked all banks to immobilise the ‘cash retraction facility’.

The typical modus operandi has been to hold on to a few pieces of notes in ATM machines that have cash retraction system, while allowing one or two pieces of notes to be retracted and then claiming non-receipt of cash. Since retracted transactions are credited back to the customer’s account, the balance in the fraudster’s account remains unaffected even after collecting bulk of the delivered cash.

However a new type of fraud occurred where people would take a few bills, then allow the rest to be retracted.  These fraudsters would then claim they never got any money and it was impossible for the bank to tell how much money was retracted for any individual transaction.

Its interesting how a new initiative can have unexpected unintended consequences.  

Written by Colin Henderson

September 23, 2012 at 21:51

Posted in Uncategorized

One Response

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  1. Never underestimate ingenuity in developing world 🙂

    The Scot Bicycle

    September 24, 2012 at 00:35


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