Banks Must Compensate Digital Arrest Victims if Due Diligence Fails: Supreme Court
The court said lenders could be liable if negligence enables cyber fraud and directed the Reserve Bank of India to consider compensation rules.
- On Thursday, the Supreme Court ruled that banks must indemnify victims of 'digital arrest' scams if losses result from a failure of due diligence. Financial institutions must compensate customers for amounts lost through institutional negligence.
- Despite a 50 percent reduction in overall cyber crimes, Chief Justice Surya Kant noted that victims lost approximately Rs 800 crore this year. The court expressed concern over sophisticated scams where fraudsters pose as authorities.
- The Court cited a recent case where a woman lost Rs 2.5 crore, urging banks to use AI and transaction history to flag suspicious transfers. WhatsApp reported taking action against 9,400 accounts to prevent fraudulent activity.
- Reserve Bank of India officials must finalize regulatory frameworks by November 30, mandating that banks implement liability clauses for non-compliance. These measures ensure financial institutions act as a 'protective umbrella' for vulnerable account holders.
- Law enforcement agencies across states and Union territories must submit reports on digital arrest investigations to an inter-departmental committee. The bench emphasized that institutions must move beyond general advisories to establish clear obligations for preventing cyber-enabled financial crimes.
20 Articles
20 Articles
SC calls for mandatory compensation to digital fraud victims in case of banks' due diligence
The Bench stressed that the proposed regulatory framework must provide for suitable compensation to victims where financial institutions are found to have failed in their due diligence obligations
Banks must compensate digital fraud victims for loss if due-diligence failure established: SC
New Delhi, Oct 29: The Supreme Court on Thursday said banks must be made accountable to indemnify losses suffered by digital fraud victims, who should receive compensation of at least the amount lost if an investigation establishes that the offence resulted from a failure of due diligence by the financial institutions. Observing that despite the fact that cyber crimes fell by 50 per cent, yet victims lost Rs 800 crore so far this year, a bench c…
The Supreme Court stated that if digital fraud occurs due to negligence on the part of a bank, the victim should be compensated for the losses incurred. The court emphasized the need to prevent unusual transactions, identify suspicious transactions, and hold banks accountable.
SC calls for compensation to digital fraud victims if banks fail due diligence
The Supreme Court has highlighted banks' accountability regarding digital fraud, asserting that victims deserve compensation for losses due to banks' lack of diligence. It called for enhanced preventive measures to spot suspicious transactions. Attorney General R Venkataramani remarked on a significant decrease in reported digital scams this year, but the court maintained that financial losses from cybercrime remain a pressing concern for the pu…
Supreme Court Directs Banks To Compensate Digital Fraud Victims
The Supreme Court has mandated that banks must be held accountable for losses incurred by digital fraud victims, ensuring compensation of at least the amount lost if the fraud stems from the financial institution's lack of due diligence. The court emphasised that the proposed RBI regulatory framework must include enforceable provisions for compensation, preventive measures, and institutional accountability, moving beyond mere advisories. The CJI…
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