MONEY
SC pulls up RBI, banks over digital arrest, cyber fraud; orders them to compensate victims
- IBJ Bureau
- Oct 30, 2026
The Supreme Court (SC) of India has ruled that banks must fully compensate victims of digital arrest and cyber fraud scams if the financial loss occurs due to a lack of institutional diligence or a failure in due diligence.
A three-judge bench, led by Chief Justice of India Surya Kant alongside Justices Joymalya Bagchi and V Mohana, pulled up the Reserve Bank of India (RBI) during a suo motu hearing, accusing the regulator of “soft-pedalling” the massive economic menace.
The SC directed the RBI’s upcoming regulatory framework to introduce a strict liability clause.
If a bank fails to exercise due diligence or prevent suspicious money movements, it must indemnify the victim for not less than the full amount lost.
The Chief Justice expressed frustration that the RBI is taking too long by constantly consulting banks when urgent regulatory action is needed.
The court noted that because bank officials are sometimes involved in setting up fraudulent accounts, the regulator cannot have a soft approach.
The bench slammed banks for focusing on business growth while ignoring the prompt detection of fraudulent “mule accounts” used by cybercriminals to siphon off funds.
The Attorney General informed the court that the RBI (Know Your Customer) Amendment Directions, 2026, are being drafted.
The Supreme Court demanded to examine this draft before it is finalised, setting a strict deadline for the RBI to notify the guidelines by November 30, 2026, and make them fully operational by December 31, 2026.
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