India's Supreme Court Wants Banks to Repay Digital Arrest Victims When Their Checks Fail

India's Supreme Court recorded in its order of 29 October that the Reserve Bank of India's coming cyber fraud rules must require banks and other financial institutions to compensate digital arrest and cyber fraud victims with no less than the amount lost where the institution's due diligence failed. No bank owes a victim anything under the order yet: the rules haven't been notified, and the bench will examine RBI's draft before it is notified.

The case is the Court's own suo motu matter on digital arrest scams, in which callers posing as police or investigators keep victims on video calls and make them transfer money. It is heard by Chief Justice Surya Kant, Justice Joymalya Bagchi and Justice V Mohana.

What the bench floated in open court

Stricter ideas came from the bench in open court. Justice Bagchi said "We will put up a strict liability on the financial institutions", and The Week reports the Chief Justice saying the Court was "proposing to direct" that a bank would compensate the victim and face prosecution. The bench also wants the victim's account to show "zero debit".

RBI's deadlines

RBI has to notify the proposed Know Your Customer Amendment Directions, 2026 by 30 November and put them into operation by 31 December, after the government asked for a month beyond the earlier 30 October deadline.

What else the Court asked for

RBI must file a list of all authorised financial institutions at the next hearing, so banks don't have to be added to the case one by one. The government owes an affidavit on what it has done, including the 9,400 accounts WhatsApp banned, and state police chiefs must report their FIRs and how far the investigations have got.

No date for the next hearing has been reported.

The Court put this year's losses to the economy from these frauds at almost ₹800 crore. Amicus curiae N S Nappinai described a single case in which ₹2.5 crore was lost in the week before the hearing.