Banks becoming liability, giving loans to fraudsters: Supreme Court in digital arrest scams case

The hearing in the suo motu case concerning digital arrest scams on Monday saw the Supreme Court express concerns that neglect or connivance by bank officials have often led to such fraudulent transactions.

A Bench of Chief Justice of India (CJI) Surya Kant and Justices Joymalya Bagchi has also issued various directions to ensure proper coordination between various agencies when it comes to tackling digital arrest scams and recover lost money, where possible.

"We have seen bank officials are completely hand in gloves with the accused in these cases of digital arrest," CJI Kant remarked today while hearing a connected matter.

He went on to add that banks must do well to remember that they are custodians of the money entrusted to them.

"These banks are becoming a liability. Banks should know that they are a trustee of the money and they should not get over excited with it. That trust should not be broken. Problem is these banks give loans to these fraudsters and then NCLT, NCLAT (comes into the picture when the fraudulent companies become embroiled in insolvency disputes) etc," he said.

The remark was made after Attorney General for India (AG) R Venkataramani told the Court that while implementing measures put in place by the Reserve Bank of India (RBI), mule bank accounts were detected.

The Court was hearing suo motu case initiated by it in October last year to address the growing menace of digital arrest scams across the country. In December 2025, the Court ordered a pan-India CBI probe into such scams.

The suo motu case was registered after a senior-citizen couple wrote to the Supreme Court stating that they were defrauded of ₹1.5 crore between September 1 and 16 by scammers impersonating as officials of the CBI, the Intelligence Bureau and the judiciary.

During today's hearing of the matter, the Court was apprised that an inter-departmental committee has been set up by the Central government to coordinate action against such fraudsters.

Further, the Court was told that the CBI has identified ₹10 crores as the amount amassed in digital arrest scams. On the preventive side, banks are now using artificial intelligence (AI) assistance to detect such fraudulent transactions, it was submitted.

The Court reiterated today that all concerned authorities must work with each other to identify and tackle digital arrest scams.

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

Notably, the Court was told that a memorandum of understanding (MoU) and a standard operating protocol (SOP) have also been drawn up as part of measures on how to deal with such digital arrest cases.

In light of the same, the Court issued directions for the swift implementation of these measures.

"Let draft MoU be prepared within 4 weeks. RBI has crafted a SOP prescribing action by banks whereby temporary debit holds can be placed to prevent cyber enabled frauds. We directed 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 2 weeks," the Court ordered.

[Live Coverage]