All ATM Debit cards are protected by a four digit password. After 3 wrong passwords,the card gets disabled. So if a card is found by somebody, the chances of such person using the card and withdrawing the money is very remote. Now in shops also if debit card is used, the user has to enter the PIN without which the transaction does not pass which means account shall not be debited.
Under the circumstances, the theft must have been committed by somebody who knows where the card is kept and what password is. Immediately advise your Parents to report the matter to the Bank that has issued the Debit Card. If the card was properly used and money was dispensed with correct password or merchant transaction was put through with proper password, there will not be any charge back ie. Banks are not responsible for the fraud.
So as per the procedure your Parents have to file a Police Complaint and with the copy of the FIR apply to the Bank to provide the details of where the transaction was put through. Then Police can examine the CC TV footage in the ATMs and find exactly who used it at that particular time when the transaction was put through. If it is a merchant transaction, most probably such establishment also shall have CC TV coverage wit which the culprit can be nabbed.
However, if the culprit is a clever criminal and wears a turban or helmet while using ATM card CC TV footage may not be useful in identifying the person. However if the card was used in a Merchant Establishment, the culprit cannot wear a helmet and use the card. So possibility of identifying the culprit in the ME are brighter if he is using some disguise. If the fellow is a first time offender, he might have used in ATM without any disguise and Police can nab him in minutes.
But all this good on paper, but we have to go through lot of running pillar to post to get the FIR lodged. Once FIR is lodged, Banks normally give the records at the earliest. So you have to act fast as the CC TV records are not kept for too long a period.
To sum up, if card was used with correct password, Banks are absolved but they cooperate with investigating agencies.