Bank & Insurer Both Liable If Farmer's Data Isn't on PMFBY Portal Despite Premium Payment: MP State Consumer Commission - 2025-09-18

Bank and Insurer Held Jointly Liable for Denied Crop Insurance Claim Over Portal Entry Error

Bhopal, Madhya Pradesh - In a significant ruling for farmers, the State Consumer Disputes Redressal Commission has affirmed that both the bank and the insurance company are jointly liable to pay a crop insurance claim, even if the bank fails to upload the farmer's details onto the official portal, as long as the premium has been deducted and transferred.

The Commission, comprising Justice Shantanu S. Kemkar (President) and Dr. Shrikant Pandey (Member), dismissed a batch of 20 appeals filed by the Bank of India. The bank was challenging an order from the District Consumer Commission, Khandwa, which had held it and the Agriculture Insurance Company of India Ltd. jointly and severally responsible for failing to compensate farmers for crop losses under the Pradhan Mantri Fasal Bima Yojana (PMFBY).

Background of the Case

The case involved several farmers from Khandwa district who had taken agricultural loans (Kisan Credit Card - KCC) from the Bank of India for the 2018 Kharif season. As per the mandatory provisions of the PMFBY for loanee farmers, the bank deducted the insurance premium from their accounts in August 2018 and forwarded it to the Agriculture Insurance Company.

That year, the farmers suffered significant crop damage, with government data confirming a soybean crop loss of over 70% in their area. Despite being eligible, their insurance claims were not processed. The farmers subsequently approached the District Consumer Commission, which ruled in their favor, directing the bank and the insurer to pay the assessed claim amount, along with ₹3,000 for mental anguish and ₹2,000 for litigation costs. The Bank of India appealed this decision, seeking to absolve itself of liability.

A Tussle of Responsibility: Key Arguments

The State Commission was faced with a classic case of institutional buck-passing, with the farmer caught in the middle.

• Bank of India's Stance: The appellant bank argued that its duty ended when it deducted the premium and transferred it to the insurance company. It contended that since the insurer accepted the premium, the liability to pay the claim rested solely with them. The bank's failure to upload the farmers' data on the national crop insurance portal was presented as a procedural lapse that did not negate the insurer's fundamental obligation.

• Insurance Company's Defence: The Agriculture Insurance Company countered that the bank's failure was not merely procedural but critical. It argued that without the farmer's data being entered on the portal, the farmer is not officially considered insured under the scheme. This entry is essential for processing claims and for the insurer to claim the government's subsidy portion of the premium. Therefore, the company placed the entire blame on the bank for its "deficiency in service."

Commission’s Analysis: A Shared Responsibility Under PMFBY

The State Commission delved into the operational guidelines of the PMFBY to determine the respective duties of banks and insurance companies. It noted that the scheme's primary objective is to provide financial support to farmers against unforeseen crop loss.

Citing various clauses from the PMFBY guidelines, the Commission highlighted that both parties had clearly defined roles and shared responsibilities:

• Insurer's Duty: The guidelines state that the insurer is responsible for collecting details of insured farmers from banks and ensuring the accuracy of the data. The Commission quoted a key provision: "It is the responsibility of the concerned insurance companies to collect/obtain the details of the insured farmers from the bank... and facilitate the banks to upload the same on crop insurance portal." Furthermore, the ultimate liability for claim payment rests with the implementing insurance agency.

• Bank's Duty: The guidelines also hold banks responsible for ensuring all eligible loanee farmers are compulsorily insured and for any misreporting or omissions in farmer coverage. A crucial clause states: "Banks should ensure that cultivator may not be deprived of any benefit under the scheme due to errors/omissions/commissions of the concerned branch... and in case of such errors, the concerned institutions shall only make good all such losses."

Final Verdict: Farmer's Rights Cannot Be a Casualty of Inter-Agency Blame Game

The Commission concluded that the farmers, having paid their premiums, could not be denied their rightful claims due to a dispute between the bank and the insurance company.

In its order, the Commission stated, "It is clear that the complainant is eligible to receive the insurance claim amount, but the appellant [Bank] and the respondent no. 2 insurance company are trying to evade their responsibilities by blaming each other. Because of this, the insured farmer, despite being eligible, has been deprived of receiving the insurance claim amount."

Finding no legal or procedural error in the District Commission's order, the State Commission upheld the decision, holding both the Bank of India and the Agriculture Insurance Company jointly and severally liable. The ruling reinforces the principle that procedural lapses by financial institutions cannot be used to deny legitimate benefits to consumers, especially vulnerable farmers protected under welfare schemes like the PMFBY.