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The Supreme Court has expressed strong displeasure over the growing menace of digital fraud, particularly cases involving so-called “digital arrest” scams, and has sharply questioned banks for failing to protect customers from suspicious financial transactions. During a recent hearing, the apex court also sought a clear explanation from the Reserve Bank of India (RBI) on why stricter regulatory measures were not implemented despite the scale of losses suffered by citizens.

A bench headed by Chief Justice of India Justice Surya Kant took up the matter while examining status reports submitted by the Ministry of Home Affairs (MHA) and the Ministry of Electronics and Information Technology (MeitY). These reports outlined the steps being taken to address digital fraud cases that have left thousands of individuals financially devastated.

Banks Questioned on Customer Safety

The court made it clear that safeguarding customers is a fundamental responsibility of banks. It questioned why suspicious transactions are not flagged in real time, even when unusual patterns are clearly visible in customer accounts. The bench noted that in many cases, fraud victims—especially senior citizens—end up losing their entire life savings due to delayed intervention.

Highlighting the human cost of such fraud, the Chief Justice observed that what may appear as “just another transaction” to banks often represents a lifetime of savings for ordinary citizens. The court questioned the level of professionalism displayed by banks and raised concerns over their response mechanisms when customers report fraud.

Why Aren’t Transactions Stopped in Time?

The Supreme Court also asked why banks fail to temporarily suspend transactions once suspicious activity is detected. It further questioned why automatic alerts are not sent to customers and cybercrime authorities when high-risk transfers occur, particularly in accounts that do not usually see large or frequent transactions.

The bench remarked that both public sector and private banks appear reluctant to act swiftly, possibly to avoid customer inconvenience, but such hesitation ultimately causes irreversible damage to victims.

Government’s Response in Court

Attorney General for India informed the court that discussions are ongoing to finalize Standard Operating Procedures (SOPs) specifically aimed at tackling digital arrest fraud cases. He stated that efforts are being made to collect comprehensive data and put uniform procedures in place across agencies.

The MHA and MeitY have submitted two status reports so far, while the RBI has prepared a draft SOP outlining how banks should respond to customer complaints related to digital fraud.

The court directed the Ministry of Home Affairs to formally adopt and implement the SOP prepared on January 2, 2026. It also stressed the need to strengthen coordination between various agencies to ensure faster recovery of stolen funds. High Courts were advised to ensure adherence to these SOPs to prevent overlapping proceedings.

Lack of Inter-Agency Coordination

An amicus curiae assisting the court emphasized that effective coordination between departments is critical and highlighted the need for clearly defined timelines. He pointed out that, as of now, the only finalized SOP is from the Indian Cyber Crime Coordination Centre (I4C), which was developed following directions from a High Court and is still at a preliminary stage.

RBI Under the Scanner

The Supreme Court raised serious concerns over the RBI’s approach, questioning why tougher policy decisions were not taken despite reports indicating that more than ₹54,000 crore belonging to fraud victims has been transferred overseas. The bench asked whether such massive losses were a result of negligence, indirect collusion, or an institutional reluctance to inconvenience customers.

The court observed that while accounts with regular high-value transactions may not trigger alarms, sudden large transfers from accounts belonging to retirees or small depositors should immediately raise red flags.

Concluding the hearing, the Supreme Court indicated that further directions may follow and asked authorities to submit a fresh compliance status report within four weeks.