SC pulls up RBI over cyber fraud and demands strict liability for losses | Today’s news
The Supreme Court on Thursday pulled up the Reserve Bank of India (RBI) over cyber fraud, saying banks must compensate victims for losses when their employees are found to be involved.
A bench headed by Chief Justice of India Surya Kant noted that digital arrest scams persisted despite public awareness campaigns, media coverage and earlier court directions. The court heard the case suo motu in this matter.
The court questioned why banks should not be held responsible for losses suffered by their customers when a financial institution can waive loans worth millions of crowns at once. “Banks can waive thousands of millions of loans by entering into a so-called one-time settlement ₹5 million or ₹10 million crowns. Why should they not be held accountable to these victims?
Attorney General R. Venkataramani opposed the introduction of such a rule and said the liability of banks must be addressed by the Reserve Bank of India (RBI).
Digital arrest
The court’s observations came after senior advocate NS Nappinai, assisting the bench as amicus curiae, pointed out the continued incidence of digital arrest scams. She referred to a recent incident in which a woman allegedly lost ₹2.5 million. In such scams, fraudsters impersonate police officers, government officials or judicial authorities and threaten victims with arrest to force them to transfer money.
The bench also told banks that customers have given them access to their account details and transaction history and must act as a “protective umbrella” for them. They also raised the question as to why banks do not take necessary steps as soon as suspicions arise or a report regarding the money comes to light.
“We are shocked that why people are not aware? What is wrong with the victims? Are they not normal people? It is all over the media,” the bench observed.
The bench also highlighted the problems of bank employees who are involved in such frauds. They questioned why the RBI consulted the banks for safeguards when some bank employees themselves were allegedly involved in the misuse of accounts.
Venkataramani also told the court that cyber fraud has reduced by 50% compared to last year. “The number of digital arrests has decreased by about 50% compared to last year due to court intervention, departmental and departmental measures and awareness programs.”
In August, the Supreme Court directed the RBI to create a framework and standard operating procedure (SOP) for banks dealing with mule accounts and cyber financial fraud. Mule accounts are bank accounts used to receive or transfer money obtained through illegal activities, including cybercrime.
During Thursday’s hearing, the attorney general asked for some time to prepare the proposed SOP. The court accepted the request and gave time till November 30 to file the proposed Reserve Bank of India Know Your Customer amendment, 2026. While the court directed the RBI to operationalize it by the end of the year.
Over 21,900 digital arrest fraud complaints involving more than ₹According to a Hindustan Times report on October 23, 647 crores were registered in the first eight months of 2026. The figures were part of a status report filed by the Indian Cyber Crime Coordination Center (I4C) and the Ministry of Home Affairs (MHA) before the Supreme Court, which took suo motu cognizance of the matter a year ago.
