If this is their quality, it's serious: Supreme Court raps banks over digital fraud

The Supreme Court on Friday came down sharply on banks over their handling of “digital arrest” fraud cases, questioning their professionalism and asking why suspicious transactions are not being flagged in time, even when vulnerable customers lose their life savings.

A bench headed by Chief Justice of India Suryakant took up the matter as the Centre submitted status reports filed by the Ministry of Home Affairs (MHA) and the Ministry of Electronics and Information Technology (MeitY) on steps being taken to tackle such frauds. The Attorney General told the court that data on cases is being collated and standard operating procedures (SOPs) are being prepared.

Observing the gravity of losses suffered by victims, the CJI said individual losses matter, noting that for an elderly couple, the loss often amounts to their entire life savings. The court said banks have a duty to protect customers and questioned why suspicious transactions are not flagged when they occur.

“If this is the professionalism and quality of banking they are showing, then it is serious,” the CJI remarked, questioning why banks -- both private and government -- are not acting promptly on customer complaints.

The bench also asked why transactions cannot be suspended and alerts sent to customers and cybercrime police stations when suspicious activity is detected.

The Attorney General informed the court that deliberations are ongoing to finalise SOPs to handle digital arrest cases and that efforts are being made to expedite the process. Two status reports have been submitted by MHA and MeitY, while RBI has drafted an SOP prescribing actions by banks on complaints.

The court directed MHA to formally adopt and implement the SOP formulated on January 2, 2026, and ensure processes to strengthen inter-agency cooperation to restore stolen funds. It also said High Courts should ensure compliance with the SOP to avoid multiplicity of proceedings.

Amicus curiae told the court that cooperation across departments is crucial and stressed the need for structured timelines. He pointed out that the only finalised SOP so far is from the Indian Cyber Crime Coordination Centre (I4C), prepared after orders of the Chhattisgarh High Court, and that too remains at a preliminary stage.

Raising concerns over systemic failures, the amicus said banks often deny compensation on the ground that victims transferred money voluntarily, which goes against the very nature of such frauds. He also highlighted that while RBI’s AI tool “Mule Hunter” has been implemented by 86 banks, other mandated AI tools such as velocity tests to flag rapid transactions are not being adopted.

The Supreme Court questioned why RBI has not taken stricter policy decisions despite public information suggesting that over Rs 54,000 crore of victims’ money has been siphoned off abroad. The CJI asked whether such losses occur due to negligence, collusion or a tacit approach of not inconveniencing customers.

The bench observed that while accounts with regular large transactions may not raise alarms, sudden high-value transfers from accounts of retirees or small depositors should necessarily be flagged. The court said it will issue further directions and sought a fresh status report on compliance after four weeks.