The Reserve Bank of India plans to implement a new draft framework allowing banks to restrict only the disputed amount in cyber-fraud cases, aiming to minimise disruptions for customers and comply with court directives.
The Reserve Bank of India is moving to make cyber-fraud checks less disruptive for ordinary customers, with a draft framework that would allow banks to place a temporary hold only on the disputed amount rather than freezing an entire account.
The proposed rules are aimed at cases involving suspected cyber fraud and so-called money mule accounts, where stolen funds are routed through intermediaries. According to reports by The Economic Times and Times of India, banks would use transaction-monitoring systems, including artificial intelligence and machine learning tools, to spot transfers of ₹1,000 or more that look unusual, are out of line with a customer’s declared profile or appear linked to known fraud networks.
If a transaction is flagged, the bank would not automatically block the customer’s whole account. Instead, it could apply a temporary debit hold to the specific amount under suspicion. The draft also leaves room for a full-account hold where the bank believes the account itself is being used as a mule account, but the default approach would be narrower and more proportionate.
Customers would be given a chance to respond. Under the draft, banks would have to notify the account holder and allow 20 days to explain the transaction, supported by identity documents, context or proof of where the money came from. Banks would then have 10 days to assess the explanation. If the response is satisfactory, the hold would have to be lifted immediately; if not, the matter could be referred to police through the NCRP-CFCFRMS portal.
LiveMint reported that the hold would generally be limited to 60 days unless a law-enforcement agency or other competent authority ordered otherwise. That would prevent banks from keeping funds blocked indefinitely on their own authority.
The move follows a Supreme Court order on August 4, 2026, which directed the RBI to frame a standard operating procedure for temporary debit holds in cyber-enabled fraud and money-mule cases, according to the RBI and several reports. The court’s intervention came amid growing concern that banks were freezing entire accounts even when only a small sum was disputed.
That issue has also reached the courts. The Allahabad High Court ruled in August 2026 that where only a specific sum is under dispute, banks should not freeze the entire account, and in one case it allowed the account to operate while retaining a lien on the disputed ₹36,000. In another September ruling, the court again directed that the disputed amount be held back while normal access to the account be restored.
The RBI said the draft is intended to balance fraud prevention with the day-to-day needs of customers who still have salaries to receive, bills to pay and loan instalments to meet. The consultation remains open until October 2, 2026, and the draft directions are due to take effect from April 1, 2027, although banks may choose to adopt the framework earlier.
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