The Supreme Court on Monday delivered one of its strongest indictments yet of banks’ role in the fast-growing menace of 'digital arrest' scams, warning that negligence and, in some cases, alleged collusion by bank officials have enabled fraudsters to siphon off crores from unsuspecting citizens, including senior citizens who lost their entire life savings.
Hearing a suo motu case on digital arrest frauds, a bench led by chief justice of India (CJI) Surya Kant directed the Union government to formally adopt and implement the standard operating procedure (SOP) of Reserve Bank of India (RBI)’s across the country, laying down a time-bound, inter-agency framework to prevent and respond to cyber-enabled financial crimes.
The SOP, crafted by RBI, prescribes a series of preventive actions for banks, including the ability to place temporary debit holds on accounts when suspicious transactions are detected, particularly in cases linked to cyber-enabled fraud such as digital arrests.
“If a pensioner who usually withdraws ₹10,000 or ₹20,000 suddenly transfers ₹50 lakh, ₹70 lakh or ₹1 crore, why did your artificial intelligence (AI)-operated tools not deem it fit to raise an alarm?” CJI Kant asked, pointing to glaring gaps in transaction monitoring.
Justice Joymalya Bagchi echoed the concern, observing that banks, in their 'business mode', have either innocently or connivingly become platforms for the swift transmission of proceeds of crime.
“We have seen bank officials are completely hand in gloves with the accused in these cases of digital arrest,” CJI Kant says, expressing deep concern over the role of banks in allowing suspicious transactions to pass unchecked.
“These banks are becoming a liability. Banks should know that they are trustees of public money. They should not get over-excited with it. That trust should not be broken,” the chief justice remarked, adding that reckless lending and lax controls often push fraudulent entities into insolvency proceedings, leaving courts and tribunals to clean up the mess.
Central bureau of investigation (CBI) has identified around ₹10 crore as proceeds amassed through digital arrest scams so far, the court was told during the hearing. Justice Bagchi pointed out that the ministry of home affairs (MHA)’s own data shows cyber frauds worth more than ₹52,000 crore between April 2021 and November 2025, an amount, CJI Kant noted, larger than the annual budgets of several states.
The Court directed the Union government to formally adopt the RBI’s SOP dated 2 January 2026 and ensure its implementation across India to improve coordination among enforcement agencies, banks and intermediaries. Rules to operationalise the framework must be notified within two weeks, the bench ordered.
A draft memorandum of understanding (MoU) among agencies must be prepared within four weeks, the court says, underlining the need for seamless information-sharing and swift response mechanisms when fraud is suspected.
The bench repeatedly returned to the human cost of such frauds. Referring to the case that triggered the suo motu proceedings, CJI Kant noted that a retired couple had lost their entire life savings after being targeted by fraudsters impersonating officials from Central agencies and the judiciary.
“There are senior citizens… a retired couple. Their entire life savings went away,” he says.
The suo motu case was initiated in October last year after the couple wrote to the Supreme Court, stating that they were defrauded of ₹1.5 crore over a two-week period by scammers posing as officers of CBI, intelligence bureau (IB) and courts. In December 2025, the Supreme Court ordered a pan-India probe by CBI into digital arrest scams.
The Court made it clear that banks cannot remain passive conduits for fraud. It stressed that financial institutions must develop mechanisms to detect and flag abnormal transactions, especially when account behaviour suddenly changes.
Attorney general (AG) R Venkataramani, told the Court that RBI’s implementation measures have already helped detect mule accounts. He added that banks are increasingly deploying their own AI-based fraud risk management tools.
However, the bench made it clear that advisories alone will not suffice. Senior counsel NS Nappinai, appearing as amicus curiae, argued that compliance must be enforced through penalties and that banks should be made accountable when they fail to act on red flags.
Placing a status report on record, the attorney general informed the court that the Union government has constituted a high-level inter-departmental committee to examine all aspects of digital arrest frauds. The committee, chaired by the special secretary (internal security) in MHA, includes senior representatives from ministry of electronics and information technology (MeitY), department of telecom (DoT), ministry of external affairs (MEA), department of financial services, RBI, CBI, national investigation agency (NIA), Delhi police and the Indian cyber crime coordination centre (I4C).
The Court directed CBI to identify digital arrest cases nationwide, RBI to take action at the issuing bank level and MeitY to follow up with digital intermediaries to ensure time-bound compliance.
The bench warned that banks cannot hide behind profitability or scale. “In the over-anxiety of making profits, banks must realise they are trustees of public money. People deposit money because they trust banks,” CJI Kant says.
Justice Bagchi suggested that RBI should introduce incentives for better reporting compliance, while the amicus curiae urged that liability be fixed on banks found negligent. He also proposed empowering RBI ombudsman to hear complaints from fraud victims against banks.
With pointed remarks, strict timelines and direct accountability fixed on banks and regulators, the Court signalled that tolerance for systemic inertia in tackling digital arrest scams is wearing thin.
The next few weeks, as RBI SOP is formally adopted and inter-agency mechanisms are rolled out, will test whether India’s banking and enforcement ecosystem can finally close the gaps that have allowed digital fraudsters to operate with alarming ease.
While trying to contain or tackle the cyber crime, the authorities should remember that it is the crooks who find loopholes to commit crimes, the police/ enforcing agencies only try to mend the loopholes in the system.
Not assigning ‘ no responsibility’ role of the banks, the observation of the honourable SC that the bankers are in hand in gloves with the accused is a serious allegation. If it is established by the investigating authorities, then why no action was taken against the rogue bankers! In such cases, the banks should also be responsible for the losses and they should pay. But, mere unfounded allegations, based on assumptions or based on imaginary perfectionism, would not lead us anywhere.
There is already a system in place in the banks to deal with the unusual transactions with circumspection. This is only to avoid withdrawals, which are not authorised by the account holders. In case of digital arrests, the victims are under duress to be a partner in the crime. For the depositors’ complicity in the crime issuing genuine withdrawal, albeit under duress, how far the banks can go to check the crime? It is also a big social malady, which has existed for ages that the authorities, who ostensibly look genuine, have to be obeyed. Poor public becomes an easy prey.
Lastly, the human nature is generally to take wrongful advantage of the loopholes in the system. It provides livelihood to the crooks.