On 29 October 2026, the Supreme Court of India directed the Reserve Bank of India (RBI) to frame regulatory measures against digital arrest fraud. A bench led by Chief Justice Surya Kant said banks should fully compensate victims, with payment not less than the amount lost, where failures in due diligence enabled the fraud.
Proposed safeguards and court observations
The Court is reviewing the proposed RBI (Know Your Customer) Amendment Directions, 2026, expected to be notified by 30 November and operationalised by 31 December 2026. It called for safeguards including temporary suspension of transactions unusual for an account, automated alerts to police and physical verification.
Surya Kant described digital arrest as the country’s “biggest financial fraud” and cited a net economic loss exceeding ₹800 crore in 2026 as of 29 October. The Court said bank employees were involved in some scams and questioned whether the RBI was being “soft-pedalling” on stricter rules.
Attorney General R. Venkataramani told the Court that reported instances had fallen by 50% this year compared with 2025, and money had been restored in more than 11 lakh cases. The suo motu proceedings began after fraudsters impersonating officials took ₹1.05 crore from an elderly couple.
Important Facts for Exams
- Digital arrest tactics: Digital-arrest scammers use prolonged video calls and threats of charges to pressure victims into transfers or surrendering credentials and device access.
- Scam money flows: Digital-arrest networks may use mule accounts, fake or co-opted SIMs and layered laundering to move and conceal stolen funds.
- Customer due diligence: KYC customer due diligence combines identity checks with assessing a relationship’s purpose and financial-crime risk, and reporting suspicious transactions.
- RBI payment oversight: The Payment and Settlement Systems Act gives the RBI regulatory and supervisory oversight of payment systems, including those used for bank transfers.
