Supreme Court rules banks must compensate victims of digital fraud
The apex court stated that banks are responsible when fraud occurs due to a failure of staff to exercise due diligence.
The Supreme Court has ruled that banks must compensate victims when fraud occurs because staff failed to exercise due diligence, according to reports by Telangana Today and The Tribune. This ruling aims to protect citizens in a vulnerable digital economy and ensures financial institutions cannot treat cybercrime solely as a customer's problem.
The decision comes as India registers the highest number of cyber frauds globally, with people losing nearly Rs 1.5 lakh to criminals every minute. While there has been a reported 50 per cent decline in cybercrime cases, senior citizens and others have lost nearly Rs 800 crore this year to organised criminal networks.
One prevalent method is the 'digital arrest' scam, where fraudsters impersonate law enforcement officials via video calls to claim victims are under investigation. These scams have exposed weaknesses in India's banking and cybersecurity systems.
The Supreme Court emphasised that robust preventive measures are better than relying on investigations after damage is done. Experts suggest banks should use transaction histories and artificial intelligence to identify unusual transfers and verify authenticity before money is lost.
A proposed RBI framework could define bank responsibilities and prescribe penalties for negligence. Tighter banking scrutiny and real-time transaction monitoring are also required to tackle the increasing sophistication of these crimes.