Digital Arrest Scams: Supreme Court Says RBI Measures Must Make Financial Institutions Compensate Victims Where Due Diligence Fails

The Supreme Court heard this suo motu writ petition on victims of digital arrest together with four connected matters: two criminal writ petitions, a special leave petition and a second suo motu writ petition (cause title). The Amicus Curiae made various suggestions and proposed consequential directions in her Note dated 14.10.2026. In response, the Attorney General for India placed on record a Note dated 28.10.2026 suggesting certain directions on behalf of the Union of India (para 2). On 29.10.2026 the Court also allowed an application for intervention (para 1). The order does not set out what either Note proposes.

The Court was inclined to issue appropriate directions on the suggestions of the Amicus Curiae and the Union of India but would, in the first instance, examine the Reserve Bank of India (Know Your Customer) Amendment Directions, 2026, proposed to be notified by 30.11.2026 and operationalized by 31.12.2026 (para 3). It reiterated that the RBI's regulatory measures ‘must mandate and incorporate suitable provisions’ requiring financial institutions to indemnify victims of digital arrest scams and other cyber frauds and to pay compensation ‘not less than the amount lost by the customer’, where the fraud or crime is established to have occurred through the institution's failure to exercise due diligence in preventing or reporting it (para 4). It recalled preventive safeguards it had emphasised in the past, which may include temporarily suspending unusual or suspicious transactions, automatically intimating them to the nearest police station and physically verifying them later (para 5). For effective implementation, the RBI must list all the authorized financial institutions on the next date (para 6). The order issues no final directions.