56 mins ago
RBI Proposes 60-Day Debit Holds for Suspected Money-Mule Accounts
The RBI wants banks to temporarily stop money leaving accounts that may be linked to fraud.
Banks could identify suspicious transactions using monitoring systems and technology.
Transactions of Rs 1,000 or more could be treated as suspicious under the proposal.
Customers would have to be told why their account was restricted.
They would get 20 days to explain the transaction or provide documents.
Banks could remove the restriction, keep it in place, or report the matter to police.
A temporary debit restriction would normally last no more than 60 days.
The proposed rules would also give customers a way to complain and require banks to keep records.
The RBI has proposed temporary debit restrictions on accounts suspected of money-mule activity or cyber-enabled financial fraud.
Banks may flag transactions of Rs 1,000 or more using monitoring, artificial-intelligence and machine-learning systems.
Customers must be informed about a hold and given 20 days to provide explanations or supporting documents.
Temporary debit restrictions would generally be capped at 60 days unless law-enforcement authorities issue further instructions.
The framework is proposed to begin on April 1, 2027, while requiring grievance resolution within 30 days and long-term recordkeeping.
- Who
- The Reserve Bank of India, banks, account holders and law-enforcement authorities are involved.
- What
- The RBI has proposed rules for temporarily restricting debit transactions and accounts suspected of money-mule activity or cyber-enabled financial fraud.
- Where
- The rules would apply to banks in India, including commercial and urban cooperative banks.
- When
- The draft framework is proposed to take effect on April 1, 2027, unless banks implement it earlier; customers would have 20 days to respond to a hold.
- Why
- The proposal follows a Supreme Court order directing the RBI to establish a standard operating procedure for suspected money-mule and fraud cases.
Fraud Prevention
Customer Protection
Temporary debit restrictions
Fraud Prevention
Banks need to act immediately when monitoring systems identify accounts or transactions potentially linked to money-mule activity and cyber-enabled financial fraud.
Customer Protection
Account-level restrictions should be a last resort, used only in exceptional situations, with customers informed and given an opportunity to respond.
Length of account holds
Fraud Prevention
Restrictions may need to continue beyond 60 days when law-enforcement authorities issue further instructions.
Customer Protection
A 60-day cap limits prolonged disruption to legitimate customers unless authorities provide additional directions.
Safeguards against wrongful restrictions
Fraud Prevention
Banks can use monitoring systems, including artificial intelligence and machine learning, to identify suspicious activity and report matters to police or the Financial Intelligence Unit-India.
Customer Protection
Banks must provide explanations for holds, allow 20-day responses, maintain grievance mechanisms and resolve complaints within 30 days.
Key facts
- Proposal
- Draft Reserve Bank of India (Know Your Customer) Amendment Directions, 2026
- Potential trigger
- Transactions of Rs 1,000 or more flagged as potentially linked to fraud
- Customer response period
- 20 days to provide explanations or supporting information
- Maximum temporary hold
- 60 days, unless law-enforcement authorities provide further instructions
- Proposed effective date
- April 1, 2027, unless banks adopt the framework earlier
- Grievance resolution
- Complaints should be resolved within 30 days
- Record retention
- Debit-hold records for at least five years; records for closed accounts for at least 10 years
Sources
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