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DIGITAL ARREST SCAMS

30 Oct 2026

Tags: Prelims   Current events of national and international importance

Source: The Hindu

Context: Supreme Court urged RBI to ensure compensation for victims of digital arrest scams where financial institutions fail to exercise due diligence.

Digital Arrest Scam

  • Meaning: Cyber fraud in which criminals impersonate police, CBI, ED or other law-enforcement officials through video/audio calls and threaten victims with arrest to extort money.
  • Modus operandi: Fake arrest warrants, fabricated investigations and threats of digital surveillance or detention to create fear and force money transfers.
  • Scale: Over ₹800 crore reportedly siphoned off through such scams in one year.

Supreme Court's Directions / Observations

  • RBI should consider full indemnification (compensation) of victims where institutional negligence contributes to fraud.
  • Banks should identify and suspend unusual transactions deviating from customers' normal transaction patterns.
  • Automated alerts regarding suspicious transactions should be sent to police authorities, followed by physical verification.
  • States directed to submit details of FIRs, investigations and prosecutions in digital arrest cases.
  • Supreme Court to examine the proposed RBI (KYC) Amendment Directions, 2026.

 

RBI (KYC) Amendment Directions, 2026

  • Intended to strengthen safeguards against cyber fraud.
  • As per the government's submission before the Court:
    • Notification: By November 30, 2026.
    • Operationalisation: By December 31, 2026.

Prelims Question

Q1. With reference to the Reserve Bank of India, consider the following statements:

  1. The Reserve Bank of India was established under the Reserve Bank of India Act, 1934, but commenced operations in 1935.
  2. The RBI was originally established as a privately owned institution and was nationalised in 1949.
  3. The RBI is responsible for regulating and supervising payment systems in India under the Payment and Settlement Systems Act, 2007.
  4. The RBI is constitutionally established under the provisions of the Constitution of India.

Which of the statements given above are correct?

(a) 1 and 2 only
(b) 1, 2 and 3 only
(c) 2, 3 and 4 only
(d) 1, 3 and 4 only

Answer: (b) 

Explanation:

  • Statement 1 is Correct: RBI was established under the RBI Act, 1934 and commenced operations on April 1, 1935.
  • Statement 2 is Correct: It was initially privately owned and was nationalised with effect from January 1, 1949.
  • Statement 3 is Correct: Under the Payment and Settlement Systems Act, 2007, RBI regulates and supervises payment systems in India.
  • Statement 4 is Incorrect: RBI is a statutory body established through legislation, not a constitutional body.

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