NEW DELHI: If you lose money to a digital arrest scam because your bank did not stop it, your bank will now have to pay you back. A consumer does not have to worry about this. That is the clear and loud message from the Supreme Court.
In its October 29 order, a bench headed by Chief Justice Surya Kant held that financial institutions must be held accountable for digital arrest scams and other cyber frauds. Where an investigation establishes that fraud occurred due to a failure to exercise due diligence, banks must indemnify victims and pay compensation not less than the amount lost.
This is the first time the top court has linked bank negligence directly to victim compensation in cyber fraud cases.
The Court reiterated that the RBI’s proposed regulatory measures must mandate such provisions. The RBI has been asked to place its proposed KYC Amendment Directions, 2026, before the Court. The directions are proposed to be notified by November 30 and operationalised by December 31. The CJI said the bench would first examine them before allowing the process to proceed.
Simultaneously, the Court directed WhatsApp and other intermediaries to apprise it of the measures they propose to undertake to prevent digital arrest scams. They must also submit proposals to I4C (Indian Cyber Crime Coordination Centre).
The bench has been monitoring the issue for months. A status report filed by the Union government recorded the steps taken after the SC's directions passed in February this year.
WhatsApp, represented by senior advocate Kapil Sibal, said it had acted against 9,400 accounts and was developing software to warn users.
The Court also directed the RBI to submit a list of all authorised financial institutions. It asked law enforcement agencies of States and Union Territories to submit reports on FIRs in digital arrest cases and suggest strategies for prevention, detection and prosecution.
The Court noted that despite a 50% fall in cybercrimes, victims lost around Rs 800 crore this year. Many victims are senior citizens who are kept on video calls for hours, threatened with arrest and forced to transfer their life savings.
The Supreme Court’s direction shifts the burden. Victims will no longer have to run from pillar to post. Banks will have to prove they exercised due diligence or pay.