A parliamentary committee criticises the Indian government’s efforts to combat cyber-enabled financial fraud, calling for stronger responsibility measures, faster intervention during the golden hour, and revised penalty frameworks to prevent mule account exploitation.
The Parliamentary Standing Committee on Finance has sharply criticised the government’s response to cyber-enabled financial fraud, saying the measures outlined by the Department of Financial Services are too procedural and do little to close the operational gaps that allow stolen money to move quickly through mule accounts. In its 44th report on action taken, the committee said digital arrest scams, phishing and investment frauds have become more sophisticated and require a much tougher, faster and more coordinated response.
According to the committee, the government pointed to a range of existing defences, including banks’ artificial intelligence and machine learning systems, the Reserve Bank of India’s MuleHunter tool, the National Payments Corporation of India’s fraud monitoring system for UPI transactions and the national cyber crime reporting portal and 1930 helpline. But the panel said these steps do not solve the core problem: banks that host mule accounts are not being held directly responsible when fraudulent money is routed through their systems.
The committee also took issue with the proposed compensation structure, saying it places 65 per cent of payouts on the RBI while beneficiary banks bear only 10 per cent. It argued that such an arrangement creates a serious moral hazard and weakens incentives for banks to detect suspicious accounts. The panel said retrospective suspicious transaction reports and general advisories are no substitute for stronger scrutiny at branch level, especially when know-your-customer checks are missed or done poorly.
A central concern in the report is the so-called golden hour, the three-to-four-hour period when frozen funds may still be recovered if fraud is reported and actioned quickly. The committee said that window is often lost because victims delay reporting and district-level police do not always have the technical capacity or specialist training to coordinate with banks in real time. It has now called for a new penal framework for negligent branches, along with a sharper loss-sharing model for banks that are found to be harbouring mule accounts.
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