SC Warns Banks: Negligence Must Mean Full Victim Payout

New Delhi, October 29: Taking a tough line on the growing wave of digital arrest and cyber scams, the Supreme Court has said it will examine the anti-cyber fraud rules proposed by the Reserve Bank of India before allowing their notification.

The court has issued a clear direction that the rules must include a compulsory provision. Where a financial institution's negligence leads to fraud, the institution must fully compensate the affected person for the loss incurred.

The bench observed that in several cases, banks' passivity and the role of their staff have enabled fraudsters to walk away with money from people's accounts. It stressed that fixing liability on banks in digital arrest cases is essential.

During the hearing, the court expressed the view that a workable system must be created in which banks directly make good the money withdrawn from a victim's account, so that common citizens are not forced to wander from one office to another.

The court asked that the RBI's proposed rules make it mandatory that if a financial institution has been careless in necessary checks and KYC procedures, causing digital arrest or cyber fraud, the institution must pay the victim compensation equal to at least the full amount cheated.

In view of the court's strong remarks, the Attorney General, who appeared for the Union government, assured that any employee whose lapse is found in a digital arrest fraud will be held individually answerable and action will be taken. He said the government and the RBI are jointly building a strong framework.

The Supreme Court also drew attention to a further concern. It observed that misuse of WhatsApp has been reported in almost all digital arrest incidents. Through WhatsApp voice and video calls, fraudsters pose as police officers or officials of CBI or ED, threaten people, and claim they are being digitally arrested.