The Supreme Court on Thursday said any mechanism to curb digital arrest frauds must provide for the prosecution of bank officials found to have colluded with fraudsters, and must require financial institutions to compensate victims if a fraud resulted from the bank’s failure.
The court directed all law enforcement agencies, including the Central Bureau of Investigation (CBI) , to submit status reports on the digital arrest cases they are investigating. Digital arrest frauds, in which callers posing as police or central agency officers hold victims on video calls and coerce them into transferring money, drew 21,928 complaints involving more than ₹ 647 crore on the National Cybercrime Reporting Portal in the first eight months of this year, according to a status report filed in the court by the Indian Cybercrime Coordination Centre (I4C) and the Ministry of Home Affairs (MHA). The RBI’s new compensation rules for electronic banking fraud, which take effect in January, pay victims at most ₹ 25,000, and only for losses of up to ₹ 50,000. The court was told that the RBI is finalising draft Know Your Customer (KYC) guidelines, which are considering the due diligence banks must carry out, and expects to notify them by November 30. It had earlier directed the CBI to investigate digital arrest cases involving ₹ 10 crore or more. Since December 1, 2025, the agency has arrested 49 people and filed charge sheets against more than 140, according to the I4C report.
“The regulatory measures proposed by RBI must mandate for financial institutions to indemnify digital arrest or cyber fraud victims for providing suitable compensation not less than the amount lost by the customer on being found that the fraud has taken place as a result of failure of the financial institution in the commission of the act or incident,” said a bench headed by Chief Justice of India Surya Kant , and comprising justices Joymalya Bagchi and V Mohana. The bench said it wanted to examine the document before it is finalised and would pass further orders after that.
The court also cited cases involving a builder-bank nexus. In those cases an RBI master circular governs the lending, yet homebuyers hit by subvention schemes have been left without a remedy.
“Strict liability of banks must be provided and in case of breach, accountability must be fixed,” it said.
