Banks May Have To Refund Cyber Fraud Losses If Due Diligence Fails
What Happened
The Supreme Court said RBI’s proposed regulatory framework should require financial institutions to compensate victims of digital-arrest scams and other cyber frauds when an investigation finds that the institution failed to exercise due diligence. Compensation should be at least equal to the amount lost by the customer in such cases. The Court will examine the proposed KYC Amendment Directions, 2026 and also stressed preventive measures for detecting and temporarily stopping unusual transactions.
Key Takeaways
This does not guarantee reimbursement for every cyber fraud victim. Compensation would apply where the fraud is found to have resulted from a financial institution’s failure to exercise due diligence.