New Delhi: The Supreme Court, on Monday, observed that banks have the responsibility to develop mechanisms to alert customers when they start making high-value transactions while being duped by “digital arrest scams.”
When a retiree, who withdraws only amounts in the range of 10,000 or 20,000, suddenly undertakes transactions in the range of 25 lakh or 50 lakh, the banks should issue an alert, the Court remarked, as reported by Live Law.
The bench of Chief Justice of India Surya Kant, Justice Joymalya Bagchi and Justice N V Anjaria, was hearing the suo motu case taken up by the Court on digital arrest scams.
Attorney General of India R Venkataramani informed the Court that the Reserve Bank of India has drafted a Standard Operating Procedure (SOP) for banks to deal with such cases. The SOP, among other things, prescribes action by banks whereby temporary debit holds can be placed to prevent cyber-enabled frauds. The Court directed the Ministry of Home Affairs to formally adopt the SOP and issue directions for its implementation across the country.
Senior advocate N S Nappinai, who is amicus curiae in the matter, submitted that the banks should be asked to issue alerts to customers about suspicious transactions, and AI-tools can be used for this purpose. She said that a mere circular by the RBI will not serve the purpose unless compliance is ensured through penalties.
“If there is a business entity with crores of transactions, it may not raise suspicions. But there is a pensioner, who withdraws 15,000-20,000, suddenly from his account, 50 lakh, 70 lakh, 1 crore is being withdrawn, why your AI operated tools in the bank did not deem it fit to alarm him, that this transaction is suspicious,” the CJI said, observing that banks should also play a pro-active role in preventing cyber frauds.
The AG said that RBI will address with concern.
“We hope you don’t invite our directions. If RBI can introduce some mechanism…” the CJI said, adding that definition of suspicious transactions is the central point for consideration for the banks.
“The problem is banks are more into business mode, and naturally so, and in doing that, they are becoming, either innocently or connivingly, platforms through which there is a swift and seamless transmission of stolen proceeds of crime.” Justice Bagchi noted, pointing out that the MHA’s report itself flagged that over Rs 52,000 crores have been misappropriated between April 2021 to November 2025 through cyber fraud.
CJI Kant pointed out that this amount is more than the budget of many states. Justice Bagchi said that the RBI needs to give points to the banks for better reporting compliance.
“In the over-anxiety of making profits, banks must realise they are trustees of public money. People have deposited because they trust the banks. These banks are becoming huge liability to the public. The Courts are becoming their recovery agents. They grant loans recklessly and then you have NCLAT, only to recover money for them,” the CJI said.
Liability should be imposed on banks which are negligent, Nappinai said. She said that the RBI Ombudsman should be authorised to take up petitions of fraud victims against the banks.
