Banks must block suspect money transfers: Supreme Court

NEW DELHI: The Supreme Court on Monday said banks must devise an AI-based mechanism to flag all suspicious transaction from an account, issue alerts, and suspend the transfer until the transaction is authenticated with the account holder.

A bench of Chief Justice Surya Kant, Justices Joymalya Bagchi and N V Anjaria said the home ministry has flagged the alarming siphoning of nearly Rs 52,000cr between April 2021 and Nov 2025 through online fraud, including "digital arrest". The bench said the banks' IT applications devised for seamless transactions cannot be only profit-oriented and must be equipped to detect unusual transactions and verify genuineness.

Banks must realise they are trustees of public money: SC on online fraud
The direction comes against the backdrop of growing number of instances where bank personnel failed to act despite unusually large withdrawls from accounts of senior citizens who had long banked with them.

Attorney general (AG) R Venkataramani said RBI has devised an SOP for banks to thwart cyber frauds. The bench asked the ministry to examine the SOP and notify them for pan-India implementation. Justice Bagchi said, “In the over-anxiety of making profits, banks must realise they are trustees of public money. People have deposited their monies in banks because they trust them. These banks are becoming a huge liability to the public.” The CJI said that the courts are becoming recovery agents for the banks, whose officials, in collusion with industrialists, grant huge loans recklessly and then use NCLAT and other tribunals to recover money.

The attorney general said the home ministry has constituted a high-level inter-departmental committee to comprehensively examine all facets related to ‘digital arrest’. The committee will work under the chairmanship of special secretary in the ministry. The court asked RBI to discharge its duties as the regulator of banking sector to ensure security of hard-earned money of retired people. “The problem is banks are more into business mode, and naturally so, and in doing that, they are becoming, either innocently or connivingly, platforms through which there is a swift and seamless transmission of stolen proceeds of crime,” bench said.




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