Editorial: New ideas to fight digital arrest

Ministry of Home Affairs' 'kill switch' and RBI's insurance proposals to combat digital arrest scams and protect customers deserve serious consideration

India has the dubious distinction of registering the highest number of cyber frauds in the world. 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. Using leaked personal data for credibility, they create fear and urgency, keeping victims on calls for hours with fake IDs and arrest warrants. Victims are coerced into transferring large sums to avoid arrest. Against this backdrop, two new ideas, proposed recently to check the menace of digital arrest, deserve serious consideration. First, a high-level committee constituted by the Ministry of Home Affairs is believed to be actively considering a technology solution called ‘kill switch’ that will allow users at the receiving end of a potential digital scam to immediately stop all financial transactions from their accounts. It is akin to an emergency button integrated into the payment applications that can instantly freeze all banking operations when a user suspects s/he is being targeted by a fraudster. Second, the Reserve Bank of India has mooted an insurance mechanism to cover fraud-related losses in the banking system. Both ideas deserve to be tested.

There is a need for insurance to play a more formal role in bank risk management to better protect customers and the wider financial system. The central bank’s suggestion signals a broader shift in thinking – from viewing fraud solely as a compliance issue to treating it as a systemic risk. Collaborative efforts between banks, insurers and regulators could lead to innovative products tailored to evolving fraud profiles, strengthening the resilience of India’s fast-digitising financial system. Experts have called for an insurance pool – backed by contributions from banks, insurers and supported by regulatory frameworks – that could spread fraud risk across the system, similar to terrorism insurance pools in several countries. Such a structure would help manage tail risks while keeping premiums affordable. The RBI’s report on ‘Trend and Progress of Banking in India’ says there were 23,879 fraud cases involving an amount of Rs 34,771 crore as of 2024-25. The RBI’s Payment Vision 2025 report has proposed studying the feasibility of setting up a Digital Payment Protection Fund (DPPF) to provide security cover to defrauded customers and payment instrument issuers. Last October, the Supreme Court had directed the Centre to entrust the CBI with a nationwide probe into digital arrest scams. All States were asked to give consent to the CBI to probe offences within their jurisdiction. The SC had acknowledged the reality that cybercrimes know no State boundaries. In fact, fragmented investigations only embolden the cross-border criminal networks.

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