Digital arrest scam: Consumer panel sends notices to banks, flags service ‘deficiencies’

The petitions filed by digital arrest victims were admitted in an order dated March 3 and on July 7.

The banks’ replies were heard by the NCDRC bench that included the commission’s President, Justice (retired) AP Sahi, and member Bharatkumar Pandya.

The NCDRC bench has said that it would consider seeking assistance of Central Government agencies like the Financial Intelligence Unit (FIU) and the Home Ministry’s Indian Cyber Crime Coordination Centre (I4C) should it be decided that the complaints were “maintainable” before the commission.

The petitions of two Gurugram victims — who had lost Rs 10.30 crore and Rs 5.85 crore — in digital arrest scams last year were clubbed together for the NCDRC case; a third case from Mumbai will also be heard at the next hearing, fixed for November 14.

Mahendra Limaye, the lawyer for all the three victims, said the Mumbai victim had lost a sum of Rs 5.88 crore after facing digital arrest last year.

Limaye told The Indian Express, “What is significant is that the Consumer Commission bench has sent notices to all banks in the chain of the digital arrest cases, including the beneficiary banks. The allegations of violation of guidelines of the Reserve Bank of India (RBI) and the deficiency of services will now be heard in detail by the Commission which is a first for the banking sector…”

The orders make clear that the issue of whether digital arrest pleas fall within the definition of a “consumer complaint’’ and what would be the “pecuniary jurisdiction” for entertaining such complaints are the two issues which will be heard.

In its March 3 order, the NCDRC bench has stated that the allegations they were examining was how “customer diligence was clearly compromised” and that “RBI guidelines were blatantly violated and no customer protection care was taken.”

The order added: “The guidelines for checking unauthorized electronic banking transactions are governed by circulars and it appears that the accounts in which the amounts have been transferred by the complainants, those accounts were maintained seemingly without taking any precautions and no alerts or red flags were raised by any of the Banks in the background that the transactions were all suspicious for huge amounts…”

Among the banks which have been sent notices and several of which were represented during the July 7 hearing are: ICICI Bank, HDFC Bank, UCO Bank, Federal Bank, Sreenivasa Padmavathi Bank, Yes Bank, State Bank of India and Kotak Mahindra Bank.

As reported in an investigative series in The Indian Express in June and July, the number of digital arrest frauds in India had jumped up to 1,23,672 cases in 2024 with an amount of Rs 1,935 crore being swindled from the victims.

The case of one of the Gurugram victims — who is now before the NCDRC and had lost Rs 5.85 crore — was investigated to show how from her bank account, the money was moved by fraudsters to 141 accounts located all over the country in three layers of transactions.

The amounts were withdrawn sometimes within seconds and minutes of being deposited from one bank to another. The fact that a single fictitious or mule account was used for multiple cyber frauds was also highlighted.