RBI draft rule may allow banks to freeze accounts over suspicious transactions
RBI has proposed a uniform process letting banks temporarily freeze suspicious transactions and mule accounts to curb cyber fraud
If a bank transfer fails despite everything appearing in order, the reason could be a new Reserve Bank of India rule. The RBI has issued an important advisory for bank account holders across the country. If a suspicious transaction suddenly appears in a bank account, the amount involved can be temporarily frozen. If required, withdrawals or transfers from the entire account can also be blocked for some time.
The RBI has released a draft of a uniform process to deal with cyber fraud and money-mule accounts. The aim of the new proposal is to prevent money obtained through cyber fraud from being transferred to other accounts. At present this is only a proposal, and public comments have been invited on it.
The question now is which bank accounts can be frozen. If a bank's transaction monitoring system flags a transaction as suspicious, potentially linked to a mule transaction or cyber fraud, the proposed rule would allow that amount to be blocked. Under the proposed rule, a transaction of 1,000 rupees or more would be considered suspicious only if the bank's system shows a fraud-related flag. If an entire bank account is suspected of being used as a mule account, withdrawals or transfers from that account could face a temporary block.
A mule account is one used to accept money obtained through cyber fraud or illegal means and then transfer it to other accounts. In some cases people deliberately use their accounts for this purpose, while in others people hand over their bank account to someone else without full knowledge of how it will be used.
If a bank places a temporary debit freeze on an account, it will be required to notify the customer. The notice must give the reason for the freeze, the process to remove it, and details of the transaction. The customer may get up to 20 days to respond. This temporary debit freeze can typically last up to 60 days.
These are currently RBI's draft rules, not the final rules. The RBI has set October 2, 2026 as the last date for public comments. The proposed guidelines would come into effect from April 1, 2027.
