THE Supreme Court onThursday said banks must be made accountable to indemnify losses suffered by digital fraud victims,who should receivecompensation of at least the amount lostifan investigation establishes that the offence resulted from a failure of due diligence by the financial institutions. Observing that despite thefact that cyber crimes fell by 50 per cent,yet victims lost Rs 800crore so far this year, abench comprising Chief Justice SuryaKant and justices Joy malya Bagchi and VMohana said the proposed Reserve Bank of India (RBI) regulatory frame work must incorporateen force able provisions for compensation,prevent iveintervention and institutional accountability. The CJI said the bench would first examine the proposed RBI KYCAmendment Directions, 2026,beforepermitting the regulatoryprocess to proceed.

 

The directions are proposed tobenotified by November 30 and operationalised by December 31. The bench emphasised that the frame work must go beyond general advisories and establish clear obligations on financial institutions,along with consequences for non-compliance. “We emphasise that the regulatory measures proposed by the RBI must mandate financial institutions toindemnify victims of digital arrest or cyber fraud through suitable compensation, not less than the amount lost by the customer,where the fraud or crime is found to have resulted from a failure of due diligence by the financial institution,” it said in its order.

 

“Theseareallhypertechnical things.Unless there is apenal direction to these banks, theywillnevermend theirways,” the CJI said. It also reiterated that banks must temporarilysuspend transactionsthatareinconsistentwith an account holder’s established transaction history, automatically reportsuspicious activity and undertake physical verification wherever necessary to establish the genuineness of a transaction. “Fraud running into thousands of crores has taken place through digitalarrest scams,and we are still unable to take very strong measures.Why can banks not be mandated to classify accounts into different groups? For individual account holders who have saved money over time,banks havethe complete audit trail. They can use AI,”the CJI said.