New Delhi: The Supreme Court has said banks and financial institutions should compensate victims of digital arrest scams if investigations establish that fraud occurred due to failures in their due diligence procedures. The court also stressed the need for preventive measures to identify suspicious transactions before funds are transferred.
A bench comprising Chief Justice of India Surya Kant and Justices Joymalya Bagchi and V Mohana said it would examine the Reserve Bank of India’s proposed Know Your Customer Amendment Directions, 2026. The revised rules are expected to be notified by November 30 and implemented by December 31.
The court emphasised that the proposed framework must include appropriate compensation for victims when financial institutions fail to fulfil their due diligence responsibilities.
During the hearing, the Chief Justice also expressed concern that people continue to fall victim to digital arrest scams despite awareness campaigns and extensive media coverage.
Questioning the logic behind such frauds, he remarked, “What kind of person you are in a democratic country if you think you are getting arrested on mobile? Hit the mobile on the wall, and the arrest goes,”
The court’s observations highlight the importance of stronger banking safeguards and accountability in tackling digital arrest fraud.
