Supreme Court seeks compensation rules for digital fraud

The Supreme Court of India has called for financial institutions to compensate customers for losses from digital-arrest and other cyber fraud when an investigation finds that failed due diligence contributed to the crime. The proposed requirement would provide compensation of at least the customer’s loss, while the court reviews draft rules from the Reserve Bank of India (RBI). It is not yet a final regulation or order imposing liability in individual cases. The bench, led by Chief Justice Surya Kant, called for mandatory safeguards at financial institutions: temporarily suspending transactions that depart from a customer’s usual pattern, automatically reporting suspicious activity and physically verifying whether transactions are genuine. The court also stressed that banks should alert nearby police stations when unusual transactions may involve a person targeted by a digital-arrest scam. The court directed the RBI to provide, by the next hearing, a list of authorised financial institutions that would be covered and details of the proposed compensation measures. It said it would examine the RBI’s proposed Know Your Customer Amendment Directions, 2026, before they are...