Editorial: Digital fraud: Make banks accountable

Financial institutions cannot escape responsibility by treating cybercrime as merely a customer’s problem

Growing cybercrimes in India expose lapses in the banking system and its surveillance mechanisms. From celebrities, industrialists and politicians to retired professionals and homemakers, every section has become vulnerable to scams—particularly the ‘digital arrest’ fraud—being perpetrated by online fraudsters using sophisticated technological tools. India has the dubious distinction of registering the highest number of cyber frauds in the world, with people losing nearly Rs1.5 lakh to cyber criminals every minute. Amid the growing concerns over the widespread instances of cyber frauds, the Supreme Court’s firm stance on the issue is a welcome development. The apex court has ruled that banks must compensate victims when fraud occurs due to their staff’s failure to exercise due diligence. Such a step would send a strong message that financial institutions cannot escape responsibility by treating cybercrime as merely a customer’s problem. This is an important step towards protecting citizens in an increasingly vulnerable digital economy. According to official data, despite a reported 50% decline in cybercrime cases, senior citizens and other people have lost nearly Rs 800 crore this year to organised criminal networks. Scamsters are adopting new technologies faster than the authorities can match. However, banks possess detailed transaction histories and sophisticated technological tools. They should be able to identify unusual transactions, temporarily suspend suspicious transfers and verify their authenticity before the money vanishes. Artificial intelligence can strengthen these safeguards, while coordination with the local police can provide an additional layer of protection. The SC has rightly emphasised that robust preventive measures are better than relying solely on investigations after the damage is done.

The proposed RBI framework should clearly define banks’ responsibilities, prescribe penalties for negligence and ensure compensation when systemic failure contributes to fraud. At the same time, public awareness holds the key to the success of the anti-cyber fraud drive. The modus operandi of fraudsters indicates that India’s cybercrime is becoming increasingly sophisticated, making it difficult for authorities to keep pace. Among various forms of cybercrime, ‘digital arrest’ has emerged as the most devious one. It poses a threat not only to the country’s financial security and stability but also to public trust in the law enforcement machinery. In digital arrest scams, fraudsters impersonate law enforcement officials via video calls, claiming that victims are under investigation for serious crimes. Education and vigilance can prevent many such crimes. Ultimately, digital banking must be built on trust and security, not convenience alone. The SC has rightly reminded banks that they are protectors of customers’ savings. Concrete action must ensure that the burden of digital fraud does not fall disproportionately on innocent victims. In the absence of clear oversight, scammers exploit both the opacity and the hype associated with digital assets. Tackling it requires tighter banking scrutiny, real-time transaction monitoring and a coherent regulatory framework for digital assets.

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