“CYBER FRAUD AND BANK LIABILITY”

AUTHOR – ISHITA AHLUWALIA, STUDENT AT AMITY UNIVERSITY

BEST CITATION – ISHITA AHLUWALIA, “CYBER FRAUD AND BANK LIABILITY”, INDIAN JOURNAL OF LEGAL REVIEW (IJLR), 6 (6) OF 2026, PG. 265-277, APIS – 3920 – 0001 & ISSN – 2583-2344.

ABSTRACT

The expansion of digital banking and online financial services has increased the risk of cyber fraud, which is posing legal and regulatory challenges to the banks and customers. Cyber fraud comprises unauthorized electronic transactions, phishing, identity theft, malware, and online payment system fraud, leading to considerable financial loss to the customers. In such cases, the liability of the banks is a complex legal issue that is often involved in the cases of cyber fraud. This study aims to focus on the legal framework of cyber fraud and the liability of the banks, with special reference to the regulatory mechanism adopted by the Reserve Bank of India and the provisions of the Information Technology Act 2000, the Banking Regulation Act 1949, etc.

The paper also deals with the responsibilities of banks in the enforcement of cybersecurity measures, protection of customer information, and the provision of prompt grievance redressal facilities. Furthermore, the paper discusses the interpretations of laws that establish the liability of banks in instances of unauthorized online transactions. The research emphasizes the need to strengthen the regulations, cybersecurity, and consumer awareness to avert cyber fraud. Strengthening the legal and regulatory system would be critical in this context to ensure accountability, consumer protection, and trust in the system.

The purpose of this study is to explore the legal issues involved in cyber fraud and analyze the regulatory environment with respect to the liability of banks for unauthorized digital transactions. The study is focused on the legal responsibilities of banks with regard to providing appropriate cybersecurity solutions, safeguarding sensitive customer information, and ensuring secure digital banking services. Additionally, the study aims to evaluate the role of regulatory bodies such as the Reserve Bank of India in formulating guidelines and policies for mitigating cyber threats in the banking industry. Lastly, the study will also discuss some of the relevant provisions under the Information Technology Act, 2000, Banking Regulation Act, 1949, and consumer protection legislation, which are useful in determining the extent of bank liability.

Keywords: Cyber Fraud, Bank Liability, Digital Banking, Cybersecurity Regulation, Consumer Protection, Unauthorized Transactions, Financial Fraud.