SC flags bank officials' role in digital arrest scams, orders coordination

The Supreme Court warned of lapses and possible collusion by bank officials in digital arrest scams and directed tighter coordination among the CBI, RBI, MeitY and other agencies

The Supreme Court on Monday flagged what it described as serious lapses and, in some cases, possible collusion by bank officials in facilitating transactions linked to so-called ‘digital arrest’ scams, warning that such conduct erodes public trust in the banking system.

 

A Bench comprising Chief Justice of India Surya Kant, Justice Joymalya Bagchi and Justice N V Anjaria, which is hearing a suo motu case on the growing incidence of these frauds, stressed the need for tighter coordination among investigative, regulatory and executive agencies to prevent losses and enable recovery of defrauded amounts.

 

Observing that banks act as trustees of depositors’ money, the CJI cautioned that institutions cannot afford to be negligent or overzealous in their dealings. He remarked that in several cases before the court, officials appeared to be ‘hand in glove’ with the accused, adding that such failures often allow fraudsters to access credit and later push disputes into insolvency fora.

 

“We have seen bank officials are completely hand in glove with the accused in these cases of digital arrest,” CJI Kant remarked.

 

“These banks are becoming a liability. Banks should know that they are trustees of the money, and they should not get overexcited with it. That trust should not be broken. The problem is these banks give loans to these fraudsters and then the NCLT, NCLAT come into the picture when the fraudulent companies become involved in insolvency disputes,” he said.

 

The comments came after Attorney General R Venkataramani informed the court that, while implementing safeguards mandated by the Reserve Bank of India, banks had detected multiple ‘mule’ accounts used to route illicit funds.

 

The apex court had taken up the matter suo motu in October last year following a letter from a senior-citizen couple who said they were cheated of Rs 1.5 crore by fraudsters posing as officials of investigative agencies and the judiciary. In December 2025, the court ordered a pan-India probe by the Central Bureau of Investigation (CBI) into such scams.

 

During Monday’s hearing, the court was told that the Centre has constituted an inter-departmental committee to coordinate action against digital arrest frauds. It was also informed that the CBI has so far identified about Rs 10 crore as proceeds linked to such cases, and that banks have begun deploying artificial intelligence tools to flag suspicious transactions.

 

Reiterating that prevention and response must move in tandem, the Bench directed the CBI to map digital arrest cases, asked the RBI to initiate action at the issuing-bank level, and instructed the Ministry of Electronics and Information Technology (MeitY) to ensure time-bound compliance by online intermediaries.

 

“We direct the CBI to identify the digital arrest cases, the RBI to take steps at the issuing-bank end and take appropriate action. MeitY is directed to follow up with intermediaries for time-bound compliance,” it said.

 

The court was further apprised that a draft memorandum of understanding and a standard operating procedure have been prepared to streamline responses to cyber-enabled frauds.

 

Taking note of this, the Bench ordered that the MoU be finalised within four weeks, directed the Union Ministry of Home Affairs to formally adopt and roll out the RBI’s SOP dated January 2, 2026, across the country, and asked that the necessary rules be notified within two weeks to enable effective inter-agency coordination.

 

“Let the draft MoU be finalised within four weeks. The RBI has crafted an SOP prescribing action by banks, whereby temporary debit holds can be placed to prevent cyber-enabled frauds. We direct the Union Ministry of Home Affairs to formally adopt and implement the SOP dated January 2, 2026, and that it be implemented across India for inter-agency coordination, location of defrauded parties, etc. Let rules be notified within two weeks,” the court ordered.