The Reserve Bank of India (RBI) has proposed new rules that could make it easier for bank customers to access the money in their accounts when a transaction is flagged for suspected cyber fraud or money-mule activity. Under the proposed framework, banks would temporarily freeze only the disputed amount instead of blocking the entire bank account.
The proposed rules would apply when unusual transactions of ₹1,000 or more are flagged as potentially linked to mule accounts or cyber fraud. Banks would be required to use AI-based transaction monitoring systems to identify suspicious transfers, including transactions that are sudden, unusually large compared with a customer’s normal profile, or connected to known cyber-fraud networks.
Customers to get 20 days to explain transaction
Under the draft directions, customers would get 20 calendar days to prove that the disputed transaction is legitimate. They could provide identity documents, details explaining the purpose of the transaction or documents showing the source of the money.
Once the customer submits an explanation, the bank would have 10 calendar days to examine the information. If the explanation is satisfactory, the bank would have to remove the hold on the disputed amount immediately.
The RBI has issued the draft amendments for public comments. The new directions are scheduled to come into effect from 1st April, 2027, although banks can implement them earlier.
Banks cannot keep funds frozen indefinitely
If a customer does not respond within 20 days, or if the explanation fails to clear the suspicion of cyber fraud, the bank would have to refer the matter to the jurisdictional police through the NCRP/CFCFRMS portal.
The bank would not be allowed to keep the disputed funds frozen indefinitely. After the referral, law enforcement agencies would have 30 days to issue a formal statutory restraint order.
The RBI said the proposed framework follows the Supreme Court’s 4th August 2026 order directing it to prescribe and circulate a standard operating procedure (SOP) for temporary debit holds involving amounts or accounts linked to money-mule activity and cyber-enabled fraud.
The draft directions seek to amend the existing provisions dealing with bank accounts and money mules under the RBI’s KYC Directions, 2025.
In recent months, there have been incidents wherein a cyber complaint was filed in one state; however, the bank account was blocked in other states over fraud suspicion. This was also being used by scammers to extort money.
Now that the RBI has issued explicit guidelines, affected individuals will not have to run from pillar to post for account reactivation or approach courts.
