New Delhi, Oct. 30 -- The Supreme Court has said financial institutions must compensate victims of digital arrest and cyber fraud for losses caused by their failure to exercise due diligence, signalling the possibility of strict liability for banks.

A three-judge bench headed by Chief Justice of India (CJI) Surya Kant, and comprising Justices Joymalya Bagchi and V Mohana, said the Reserve Bank of India's (RBI) proposed regulatory framework must mandate compensation of at least the amount lost where fraud is found to have resulted from a financial institution's failure to exercise due diligence.

Hearing a suo motu case on rising digital arrest scams, the bench questioned the RBI's approach of consulting banks instead of ensuring accounta...