Credit card fraud in India: Key legal provisions and punishments explained

With the rise of digital transactions credit card frauds have also become a pressing concern for millions. That is why understanding the legal consequences and safeguarding your credit card is crucial for every cardholder.

Here’s what you should definitely know about the punishment for credit card fraud, key legal provisions, associated complications and recent developments impacting the usage of credit cards in the country.

Legal provisions: Which laws apply?

Credit card frauds in the country are not governed by a single, standalone law or legal provision. Instead, perpetrators can be tried and prosecuted under multiple statutes including the Indian Penal Code (IPC), 1860 and the Information Technology (IT) Act, 2000. The most important legal provisions in this regard include:

• Section 66C, IT Act: This section punishes identity theft with imprisonment of up to three years. Not only this, the accused can even be fined up to ₹1 lakh for fraudulently using another person's electronic signature or unique identification feature.
• Section 66D, IT Act: This section addresses cheating by personation using a computer resource or desktop with imprisonment up to three years and a similar fine.
• Section 468, IPC: Forging electronic records, documents for cheating an innocent individual can result in imprisonment up to seven years and a fine under this section.
• Section 471, IPC: Utilising a forged document or electronic record as genuine carries the same charges and punishment as forgery.
• Section 447, Companies Act: This section has been evolved to punish criminals for financial frauds, imprisonment under this legal provision can range from six months to ten years. Depending on the intensity of the crime. There is also a provision of serious fines under this section on individuals who carry out financial frauds.

Punishment and liability: What are the consequences?

The punishment for credit card scams in the nation varies depending on the type of offence that has been committed. For identification theft and impersonation the maximum penalty is three years in prison and a fine of ₹1 lakh.

Whereas for forgery and associated crimes the criminal penalty can be extended to seven years in prison and a fine. Finally, in cases of large scale financial fraud sentences can be very serious such as a ten year prison sentence and a substantial fine.

Recent case laws and precedents

The Hon’ble SC and HC both have taken a very strict view on financial frauds, especially cases related to credit card frauds. For example, in the landmark case of Sudhir Chopra V State Bank of India (2022), several suspicious credit card transactions resulted in the immediate card blocking, reinforcing the judiciary's support for prompt action by financial institutions to curb fraud.

In another significant case of Vodafone Cellular Limited vs Mr Sanjay Govind Dhande And Others (2020), the court held both telecom companies and banks accountable for failing to implement robust verification and security protocols, directing them to compensate the victim. These rulings underline that not just the fraudster, but also negligent institutions can be held responsible, setting an important precedent for institutional accountability in financial frauds.

What should you do if you are a victim?

If you ever suspect any unauthorised transaction then block your credit card immediately. Post the same report, the incident to your respective bank. As per the recent guidelines if you report the fraud within three days i.e., 72 hours and there is no negligence on your part, you will then not be held responsible for the loss. Delay in reporting can result in partial liability still banks must resolve the problem within 90 days.

Prevention and vigilance

Therefore, staying vigilant and consistently monitoring your credit card statements using secure passwords, proper channels of communication and avoiding sharing sensitive information with others are simple steps that can minimise financial crimes and reputational damage. Building knowledge on credit cards and their efficient usage can also go a long way to assist you in defending your financial health.

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