Supreme Court Directs Banks to Pay Compensation to Digital Fraud Victims

Banks must pay back the money lost by victims of digital fraud if the crime happens because the bank failed to do its proper job, the Supreme Court stated on Thursday, October 29, 2026. A Bench consisting of Chief Justice Surya Kant and Justices Joymalya Bagchi and V. Mohana said victims of digital arrest scams should get back at least the amount they lost in such cases.

## Proposed Rules

The Bench will check the Reserve Bank of India's new Know Your Customer Amendment Directions for 2026. These rules are likely to be officially shared by November 30 and put into action by December 31. The court stated that these guidelines must include clear ways to pay back victims when financial institutions fail in their duties.

## Safety Steps

The judges called for mandatory safety actions to stop fraud early. These include stopping unusual money transfers that do not match a customer's usual spending habits, automatic reporting of weird activity, and physical checks to see if a transfer is real. The court also said banks must warn local police stations right away when unusual transfers happen to customers who might be trapped in digital arrest scams. Furthermore, the court asked the Reserve Bank of India to give a list of all approved financial institutions by the next hearing so that orders can cover all of them without adding individual banks to the case.

## Government Report

Attorney General R. Venkataramani told the court that reported digital arrest cases have dropped by about 50 percent compared to last year. He said this drop happened because of court actions, joint work by government ministries, and public awareness campaigns. Even so, the Chief Justice pointed out that the country still lost nearly 800 crore rupees to these crimes this year. The Chief Justice also pointed to two major problems needing attention: bank accountability and mule accounts, which criminals use to take and move stolen money.

## Context

Digital arrest scams are a growing type of cybercrime where fraudsters trick people into believing they are under arrest via video calls and force them to transfer money out of fear. Courts and government agencies across India are pushing financial institutions to tighten their digital security systems and monitor suspicious bank accounts more closely to stop these losses.