India's Supreme Court has pressed the Reserve Bank of India (RBI) to make sure financial institutions compensate victims of digital arrest scams when they are negligent. The push comes as cyber fraud continues to drain over ₹800 crore from the economy, raising alarm across the nation.
Chief Justice of India (CJI) Surya Kant voiced disbelief over how easily victims fall for scams involving threats of arrest. He openly questioned why individuals don't turn to the police instead of succumbing to such frauds.
The court is preparing to examine the proposed RBI (Know Your Customer) Amendment Directions, 2026, which aim to curb cyber fraud. The Bench stressed the urgent need for financial institutions to put systems in place that can pause suspicious transactions and notify authorities for further checks.
Attorney-General R. Venkataramani, who represents the Union government and the RBI, warned against hasty regulatory moves. He called for comprehensive discussions with stakeholders. He assured the court that the new KYC guidelines would be in effect by December 31, with notifications expected by November 30.
Even though there has been a reported 50% drop in digital arrest cases this year, the financial damage remains severe. The Attorney-General noted that over 11 lakh cases have seen money being restored, with authorities acting on more than 5.5 lakh requests.
The CJI pointed out the involvement of bank employees in these scams and questioned whether the RBI has been too lenient in enforcing regulations. The court's frustration was clear as it demanded detailed reports from states on the progress of investigations and prosecutions related to digital arrest cases.
Senior advocate Kapil Sibal, speaking for WhatsApp, informed the court that the platform had proactively banned 9,400 suspicious accounts. Efforts are ongoing to create software that can identify accounts pretending to be law enforcement officials.
The court has allowed WhatsApp to be part of the case, acknowledging the role of instant messaging platforms in these scams. The CJI remarked on how platforms like WhatsApp are misused to perpetrate digital arrests.
Amicus curiae N. S. Nappinai highlighted the psychological tactics used on victims, suggesting a form of hypnosis might be involved. The court remains baffled by the widespread fear of arrest.
The Bench has set a follow-up hearing before November 30, aiming to tackle the regulatory framework and ensure strong measures are in place to effectively combat digital arrest scams.
