Sending a strong message to banks, telecom operators, and regulators, the Supreme Court on Monday took a tough stand against the rising menace of cyber fraud, declaring that any lapse by banks enabling fraudsters to siphon off customers’ money would amount to a “deficiency of service.” The top court called for an urgent, system-wide alert mechanism to detect and stop suspicious transactions in real time.
A Bench comprising Chief Justice Surya Kant and Justice Joymalya Bagchi described the scale of cybercrime in India as “alarming” and expressed deep concern over the vulnerability of the banking ecosystem in the face of increasingly sophisticated online scams, including so-called digital arrest frauds.
Rs 3,000 crore cyber fraud losses ‘deeply disturbing’
Referring to figures placed on record by investigating agencies, the court noted that nearly ₹3,000 crore has already been looted through digital arrest scams and other cyber frauds across the country.
“The staggering amount taken from innocent citizens is shocking,” the Bench observed, adding that banks cannot afford to function as passive intermediaries when clear red flags appear in customer accounts.
The judges emphasised that banks must have robust early-warning systems capable of identifying abnormal transactions, unusual fund movements, or suspicious account behaviour. Once such red flags emerge, alerts should be triggered immediately across the banking network to prevent further losses.
Banks can’t escape responsibility, court signals
In a significant observation, the Bench made it clear that failure to act promptly on warning signs would expose banks to legal accountability. Allowing fraudsters to repeatedly exploit systemic gaps, the court said, cannot be brushed aside as isolated criminal acts beyond institutional control.
The message was unambiguous: customer protection is not optional in a digital financial system.
Centre admits gaps, promises reforms
Attorney General R. Venkataramani, appearing for the Centre, conceded that cybercriminals were exploiting structural loopholes in the existing framework. He informed the court that the government is actively working with regulators and enforcement agencies to close these gaps.
An inter-ministerial committee, he said, is examining multiple proposals to combat cyber frauds, particularly digital arrest scams that rely on impersonation of law enforcement agencies and psychological intimidation of victims.
Recovery of stolen money must be priority
Amicus curiae and senior advocate N. S. Nappinai urged the court to shift focus from merely arresting perpetrators to recovering stolen funds. Citing the United Kingdom as an example, she pointed out that over 90% of defrauded amounts there are traced and returned to victims.
She stressed that Indian victims should not be left to bear lifelong financial losses due to systemic inefficiencies.
SIM boxes, telecom failures under scanner
The court also flagged the role of telecom infrastructure in enabling cybercrime. Vipin Nair, President of the Supreme Court Advocates-on-Record Association, highlighted the unchecked sale of SIM boxes capable of operating hundreds of SIM cards simultaneously—tools frequently used by fraud networks.
The Bench recalled that it had earlier directed the Department of Telecommunications (DoT) to address lax SIM verification norms, noting with concern that little progress appeared to have been made.
CBI probe continues under court’s watch
The Attorney General informed the court that the CBI, tasked with a nationwide probe into digital arrest scams, has made substantial progress. The Supreme Court directed the agency to submit a status report in a sealed cover, assuring further directions if needed.
A warning shot across the digital ecosystem
The Supreme Court’s remarks mark a decisive shift in India’s approach to cybercrime—placing responsibility squarely on institutions, not just criminals. By demanding early-warning systems and accountability, the court has signalled that citizens’ digital savings must be protected with the same seriousness as physical assets.
