Bankers highlight safety nets and awareness drives to tackle the ‘digital arrest’ scam, and both the Ministry of Home Affairs and the Reserve Bank of India continue to roll out new measures. Yet the challenge remains: citizens are still falling victim to these evolving frauds. Despite growing efforts, fear and intimidation continue to outpace the security systems.
Consider these recent cases. A Gurugram woman who lost Rs 5.85 crore in a “digital arrest” scam has blamed her banks for clearing huge transfers without raising alarms. In September 2024, fraudsters posing as law enforcement trapped her in a video call, flashing fake IDs and threatening her with jail and harm to her son. Under pressure, she transferred Rs 2.8 crore one day and Rs 3 crore the next. She later questioned why her bank didn’t flag withdrawals nearly 200 times bigger than her usual transactions, while tracing the money to another leading private bank account that previously held only a few thousand rupees.
In some instances, bank employees were also part of the fraud. A 32-year-old Bengaluru-based bank employee, Prathap Kesari Pradhan, was arrested by Hyderabad cybercrime police for aiding a nationwide “digital arrest” scam. As a customer relations officer at AU Small Finance Bank, he allegedly opened and managed accounts for fraudsters, sharing details via WhatsApp. Linked to seven cases across India, his role surfaced after a 60-year-old woman from Hyderabad was duped of over Rs 10 lakh in July by scammers posing as police and RBI officials, who threatened her on a six-hour video call and used forged documents.
The Ministry of Home Affairs recently met senior police officials across states, terming the digital arrest scam a “national threat”. In late 2024, it set up a high-level committee to probe such scams and wider cyber fraud. Through its I4C unit, the ministry has already blocked thousands of WhatsApp accounts linked to fraudsters and is working with telecom providers to cut off SIM cards, devices, and VoIP services used in these crimes.
RBI Governor Sanjay Malhotra, in a meeting with bank chiefs on January 27, 2025, warned of rising digital fraud and pressed lenders to strengthen detection and prevention systems. Later, on June 30, RBI directed all banks — including small finance, payments, and co-operative banks — to integrate the Department of Telecommunications’ Financial Fraud Risk Indicator (FRI) into their systems. In parallel, RBI is developing a Digital Payment Intelligence Platform (DPIP) with banks to enable real-time intelligence sharing and track fraud patterns more effectively.
Bank mechanisms
However, banks have put in place what they describe as robust mechanisms. Dedicated digital transaction monitoring departments track every large or unusual movement of money in savings accounts round the clock. “If a transaction in a retail customer’s savings account appears unusually high, an immediate alert is generated and sent to the concerned branch. The branch then contacts the customer to confirm if the transaction is genuine,” said an official of a nationalised bank. On paper, the system sounds foolproof.
Banks, meanwhile, are scrambling for a damage control. Public awareness campaigns, SMS alerts, posters in branches, and even training sessions for customers have been rolled out. But the results are underwhelming. “In cases of digital fraud, the most important thing is to support the customer, who is already under immense stress. Our relationship managers act immediately to help victims report the crime and block further transactions,” said an official of a state-run lender.
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The losses are staggering. Estimates suggest that more than Rs 2,500 crore has been siphoned off through the digital arrest scam in the past two years. Even this frightening number is likely an underestimation, as a significant chunk of cases never reach the police or investigative agencies. Many victims, too embarrassed or too scared, choose silence over filing a complaint. This cloak of secrecy emboldens the fraudsters further.
The modus operandi
Scamsters masquerade as officers of powerful government agencies — the CBI, Enforcement Directorate, Customs Department, or even the telecom regulator. They trap unsuspecting victims in a web of lies, convincing them that they are implicated in serious crimes such as money laundering, drug smuggling, or financial fraud. Then comes the psychological torture: a “digital arrest” where victims are made to sit on endless video calls, threatened with jail, and ordered to transfer money to so-called “safe accounts.” Once the funds are sent, they are routed through multiple mule accounts created with forged documents, making recovery nearly impossible.
What makes this scam even more damning is the profile of the victims. Unlike old-school frauds targeting the elderly or digitally naïve, digital arrest scams are catching educated, urban individuals. Unless banks, regulators, enforcement agencies, and the government act in a coordinated manner, this racket will keep spreading.
For now, the message is stark: the digital arrest scam has exposed the underbelly of India’s digital finance system. It shows how fear, technology, and weak enforcement can together strip citizens of not just their money but also their sense of security.
How banks can strengthen fraud prevention further
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- A mechanism to refund the money that they paid to scamsters.
- As most frauds rely on mule accounts opened with fake IDs, banks must do stricter KYC checks (biometric, Aadhaar-linked) to block fake accounts.
- They should share a real-time database of suspected mule accounts across banks and NPCI so transactions can be stopped mid-route, according to an expert.
- Banks must work with the RBI, TRAI, police cyber cells and telecom operators to quickly block accounts once fraud is reported. They should trace fund flows across institutions in hours.
- Instead of just alerting branches, banks should call or video-verify the customer before clearing large flagged transfers.
- Freeze transactions for a short “cool-off” window (say 1–2 hours) to allow verification when risk signals are detected.
- Flag not just high-value but also unusual transaction patterns — like sudden large transfers from dormant accounts, multiple outward transactions in quick succession, or transfers to newly opened accounts.
- Run hard-hitting campaigns that show how the scam works (videos, mock calls).
