The Supreme Court on Thursday called on the Reserve Bank of India (RBI) to mandate financial institutions to fully indemnify digital arrest victims if the crime happened due to a lack of institutional diligence. Expressing “frustration” at digital arrest scamsters siphoning off crores from the national economy annually, the top court also questioned how educated people remained gullible enough to believe they can be detained over mobile phone calls.
Noting that over ₹800 crore fell into the hands of cyber fraudsters impersonating law enforcement agents, Chief Justice of India Surya Kant said, “We are really shocked… Why can’t people understand? What is the issue with these victims? Are they not normal, sensible people?”
The court said it wanted to examine the proposed Reserve Bank of India (Know Your Customer) Amendment Directions, 2026, which are intended to curb cyber fraud. It said systems must be in place within financial institutions to temporarily suspend transactions that uncharacteristically deviate from an account’s transaction history. Automated alerts of such transactions must be relayed to police authorities, followed by physical verifications and ascertainment of their genuineness, the court said.
The Bench directed States to provide information on FIRs registered in digital arrest cases and the status of their investigation and prosecution. The court agreed to schedule the case again before November 30.
A visibly anguished CJI said warnings against digital arrest scams were splashed across all media, besides in repeated orders passed by the top court itself. Amicus curiae N.S. Nappinai said even educated people were falling for the trap. “What is this fear of arrest? Can they not understand a basic thing that no one can be arrested over a mobile phone call… Just throw your mobile against the wall,” the Chief Justice said.
The Amicus curiae pointed out that psychologists have said the victims may have undergone some sort of hypnosis.
The CJI questioned the state of mind of people who, rather than swinging into action to alert the nearest police officer, allow themselves to be victimised in a democracy. “We feel frustrated… Why can’t we stop this crime?” he asked. He said digital arrest has turned into the “biggest financial fraud in the history of this country”.
The court said the “problem was [that] bank employees are involved”. The CJI asked whether the RBI was “soft-pedalling” on bringing in regulatory measures.
No ‘magic wand’
Attorney-General (AG) R. Venkataramani, appearing for the Union government and the RBI, advised against haste, saying counter-measures cannot be put into effect with “a wave of the magic wand”, but only through ongoing and exhaustive consultations between the central bank and various stakeholders. He said the proposed RBI (KYC) Amendment Directions, 2026, would be notified by November 30 and operationalised by December 31.
Mr. Venkataramani said instances of digital arrests have reduced by 50% this year compared to the previous year. He said money has been restored in over 11 lakh cases. Over seven lakh requests for restoration had been received. Authorities have passed orders in over 5.5 lakh cases. “The RBI is not sleeping over it,” the AG said.
“But despite all these good efforts, the net loss suffered by the country’s economy is over ₹800 crore,” the Chief Justice remarked. The previous year, around ₹3,000 crore had been lost to digital arrests.
The CJI said digital arrests were perpetrated by misusing the instant messaging platform, WhatsApp. Mr. Venkataramani said intermediaries’ responsibilities would be part of the instructions to be issued by the Ministry of Electronics and Information Technology and the Department of Telecom.
Senior advocate Kapil Sibal, appearing for WhatsApp, orally submitted that the platform has already banned 9,400 suspicious accounts on its own. He said efforts were underway to develop software to identify accounts impersonating law enforcement officials and government agencies, leaking profile photos, etc. The court allowed WhatsApp to intervene in the case and submit a response.
Published on October 29, 2026
