Supreme Court on digital arrest scams: banks must compensate victims if they fail due diligence
On 29 October 2026 the Supreme Court said RBI's new rules must make banks repay at least the amount lost when due diligence fails. What it means for you.
The Supreme Court has told RBI that its new anti-fraud rules must make banks pay when they fail in their duty. The order was passed on 29 October 2026 in a case the court started on its own about "digital arrest" scams. Here is what was said, and what has not changed yet.
What the court said
A bench of Chief Justice Surya Kant and Justices Joymalya Bagchi and V Mohana said the measures RBI proposes must make financial institutions compensate victims of digital arrest and cyber fraud. The compensation must be not less than the amount the customer lost, where the fraud is found to have happened because the institution failed in its due diligence.
The court also suggested that:
- Banks should temporarily hold transactions that are very different from an account's usual pattern, instead of only reporting them after the money has left.
- Automatic alerts on such transactions should go to the nearest police station, followed by a physical check that the transfer is genuine.
- Banks could group accounts by how they are normally used, for example a retired person's savings account against a business account, and could use AI to spot odd activity.
The Chief Justice said victims lost about ₹800 crore to digital arrest scams this year. The Attorney General told the court that such cases have fallen by about 50% compared with last year.
What RBI will do next
The Attorney General said the RBI (Know Your Customer) Amendment Directions, 2026 will be notified by 30 November 2026 and operationalised by 31 December 2026. The court said it will examine the draft before it issues further directions. It also asked RBI to give a list of all the financial institutions the rules will cover by the next hearing, which the court agreed to hold before 30 November. It asked state police chiefs for details of the FIRs filed in digital arrest cases.
What has not changed
This is a direction to RBI, not a rule you can use today. There is no new refund amount for you yet, and the court has not said how a bank's "failure of due diligence" will be decided. Banks have not changed their process because of this order.
The rules that already exist stay as they are. RBI's refund rules of 24 June 2026 apply to electronic transactions made on or after 1 January 2027. Under them the bank must prove the customer's fault, a victim who reports within 5 calendar days can get a full refund when the fault lies elsewhere, and a bona fide victim with a loss of up to ₹50,000 can get 85% of the net loss, at most ₹25,000, once in a lifetime. Read the full rules in RBI's new fraud refund rules from 1 January 2027.
If you are hit by a fraud now
- Block your card, UPI or net banking at once.
- Report to your bank and keep the complaint number.
- Call 1930 or file at cybercrime.gov.in on the same day.
- Keep screenshots, SMS alerts and call details.
No police force, court or government agency arrests anyone over a video call or asks for money to "clear" a case. Hang up and call 1930. See also how a court ordered an OTP fraud refund.
Sources: The Hindu: SC calls for mandatory compensation to digital fraud victims in case of banks' due diligence, 29 October 2026, Moneycontrol: Supreme Court asks RBI to list banks regulated by digital arrest norms, 29 October 2026, Hindustan Times: Banks must compensate digital arrest victims if due diligence fails, 29 October 2026, Verdictum: Supreme Court on RBI rules and bank compensation, 29 October 2026, RBI: Responsible Business Conduct Third Amendment Directions, 2026.
Rules, rates and limits change. Check the official source linked above before you rely on a figure here. Posts never contain referral or affiliate links from the writer.
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