The Supreme Court has mandated that banks in India must implement mechanisms to identify and block suspicious money transfers, in an effort to combat the growing problem of online fraud. The ruling came on Monday, February 9, 2026, amidst rising concerns about the use of banking channels for siphoning off funds through cybercrimes, including scams involving "digital arrests".
The court's directive emphasizes that banks can't solely focus on profit-making and must act as trustees of public money. A bench headed by Chief Justice Surya Kant, along with Justices Joymalya Bagchi and N V Anjaria, stated that banks need to deploy AI-based systems to flag unusual transactions, issue alerts to account holders, and suspend transfers until the transactions are authenticated. The court noted the alarming statistic that approximately Rs 52,000 crore was siphoned off between April 2021 and November 2025 through online fraud.
The Supreme Court's order addresses the increasing instances where bank personnel have failed to act despite large withdrawals from accounts, particularly those of senior citizens who have long-standing relationships with the banks. The court has expressed concerns that banks are becoming a liability to the public, with officials sometimes colluding with fraudsters.
To address the issue, the court has directed the Union government to formally adopt and implement the Standard Operating Procedure (SOP) devised by the Reserve Bank of India (RBI) across the country. This SOP provides a framework for preventing and responding to cyber-enabled financial crimes, including placing temporary holds on accounts when suspicious transactions are detected. The Attorney General (AG) R Venkataramani stated that the Home Ministry is examining the SOP.
The Supreme Court has initiated a suo motu case based on a letter from a retired couple who were defrauded of ₹1.5 crore by scammers posing as CBI and IB officers. The court has also ordered a nationwide investigation by the CBI into digital arrest scams.
The court has directed the RBI to fulfill its role as the banking sector regulator and ensure the security of transactions. It suggested the RBI should introduce incentives for better reporting compliance, while an amicus curiae proposed fixing liability on negligent banks and empowering the RBI ombudsman to hear complaints from fraud victims. The Ministry of Home Affairs (MHA) has formed a high-level inter-departmental committee to examine all aspects of "digital arrest" scams.
The Supreme Court's intervention highlights the urgent need for banks to strengthen their transaction monitoring systems and protect customers from online fraud. The ruling emphasizes that banks must prioritize the security of public money and ensure that their systems are not exploited by fraudsters. The new measures are expected to bring greater accountability to the banking sector and enhance the safety of online financial transactions.