2026, Vol. 6, Issue 1, Part A

With the fast-growing digitization of all sectors, digital banking quickly changed the face of traditional banking in India by providing easier, faster and cost-effective financial services. Banks are increasingly providing services 24x7 to customers through electronic means (such as net banking, mobiles banks, ATM network and electronic fund transfer systems) which are available across time zones in both rural and urban areas. Even as digital banking has delivered tremendous benefits to customers, by driving financial inclusion and efficiencies, it has also escalated fears about data privacy, cybersecurity and growing incidence of digital fraud. The growing reliance on digital banking services has left both consumers and banks vulnerable to a gamut of cyber threats such as ATM fraud, NEFT frauds, social engineering attacks, insider-enabled scams and epic corporate banking heists. Such threats do not only lead to money loss but also create the problem of trust and leak sensitive personal and financial data.

Under such circumstances, providing strong legal protection on data privacy and digital transactions has emerged as an important challenge for regulators and policy makers. Methodology: The research follows the doctrine method of social scientific research comprising primary data (judgment of Supreme Court and High Courts, gazette notification of Reserve Bank of India, reports published by government) as well as secondary sources (journals). The research uses famous banking-crime cases as examples to critique weaknesses in supervision, internal control, and corporate governance systems. It also analyses the schemes of Indian Penal Code, banking laws and corporate legislation vis-à-vis digital banking frauds and finally it examines the efficacy of the extant penal measures against such abuses. The study finds that while India has achieved significant success in digitising its banking system, the legal and regulatory infrastructure needs further strengthening to effectively deal with cyber threats. The study highlights the necessity for further data security initiatives and progress in institutional governance, public understanding and more safety-oriented technospace to make digital banking in India suitable and reliable.