India, Oct. 29 -- The Supreme Court has called for banks to compensate victims of digital fraud when a failure to exercise due diligence contributes to their losses, putting financial institutions' accountability under scrutiny as cybercrime continues to drain money from unsuspecting customers.

The court asked the Reserve Bank of India (RBI) to incorporate mandatory compensation provisions into its proposed regulatory framework. Under the proposed approach, financial institutions would have to compensate victims for at least the amount lost when their failure to meet due diligence obligations is established.

The bench, led by Chief Justice Surya Kant, also stressed that banks should identify and pause suspicious transactions before fund...