The Supreme Court on Thursday pulled up the Reserve Bank of India over rising cyberfrauds. The bench asked why banks should not be held accountable for customer losses. “Banks can waive thousands of crores in loans,” the court said. It also questioned why banks do not protect their account holders.
The Supreme Court on Thursday pulled up the Reserve Bank of India (RBI) over cyberfrauds, saying banks must compensate victims for losses when their employees are found to be involved.
A bench headed by Chief Justice of India Surya Kant noted that digital arrest scams persisted despite public awareness campaigns, media coverage and earlier judicial directions. The court was hearing a suo motu case on the issue.
The court questioned why the banks should not be held accountable for the losses suffered by their customers, when the financial institution can waive loans worth crores as a one-time settlement. “Banks can waive thousands of crores in loans by entering into so-called one-time settlements for ₹5 crore or ₹10 crore. Why should they not be accountable to these victims?”
Attorney general R. Venkataramani opposed implementing such a rule, stating that the liability of banks needs to be addressed by the Reserve Bank of India (RBI).
Digital arrests
The court’s observations came after senior advocate N.S. Nappinai, assisting the bench as amicus curiae, flagged the continued prevalence of digital arrest scams. She referred to a recent incident in which a woman allegedly lost ₹2.5 crore. In such scams, fraudsters impersonate police officers, government officials or judicial authorities and threaten victims with arrest to force them to transfer money.
The bench also told the banks that the customers have given them access to their account details and transaction history, and they must act as a “protective umbrella” for them. They also raised the question of why banks do not take the necessary steps as soon as suspicions arise or a money-related message appears.
“What we are shocked about is why people are not realizing? What is wrong with the victims? Are they not normal people? This is everywhere in the media,” the bench observed.
The bench also raised issues of bank employees being involved in such frauds. They questioned why RBI was consulting banks on safeguards when some bank employees were themselves allegedly involved in the misuse of accounts.
Venkataramani also told the court that cyberfrauds had been reduced by 50% compared to last year. “The number of digital arrest cases has reduced by about 50% compared with last year because of the court’s intervention, action by ministries and departments, and awareness programmes.”
In August, the Supreme Court directed the RBI to set up a framework and a standard operating procedure (SOP) for banks dealing with mule accounts and cyber-enabled financial fraud. Mule accounts are bank accounts used to receive or transfer money obtained through illegal activities, including cybercrime.
During Thursday’s hearing, the attorney general asked for some more time to get the proposed SOP ready. The court accepted the request and granted time till 30 November to file the proposed Reserve Bank of India Know Your Customer Amendment Directions, 2026. While the court instructed RBI to make it operational by the end of the year.
More than 21,900 complaints of digital arrest fraud involving over ₹647 crore were registered in the first eight months of 2026, according to a 23 October report by Hindustan Times. The figures were part of a status report filed by the Indian Cybercrime Coordination Centre (I4C) and the ministry of home affairs (MHA) before the Supreme Court, which took suo motu cognisance of the issue a year ago.