RBI New Rule may give relief to bank customers facing cyber fraud or suspicious transaction investigations.
Under the proposed framework, banks may not be allowed to freeze an entire account merely because a suspicious transaction is detected.
Instead, the bank would temporarily freeze only the amount linked to the disputed or suspected cyber fraud transaction, while the remaining balance could continue to be used.
RBI New Rule Targets Only Suspicious Funds
Under the proposed rules, if an unusual transaction of ₹1,000 or more indicates that an account may be a mule account or connected to cyber fraud, the bank could temporarily freeze only the related amount.
The rest of the customer’s account would remain operational. This would replace the practice of placing a blanket freeze on the entire account in such cases.
Banks Will Use AI to Detect Suspicious Transactions
Banks would be required to use AI-based transaction monitoring systems under the proposed framework. These systems would identify transactions that are unusual compared with a customer’s normal account activity.
The monitoring would also cover transactions that appear disproportionate to the customer’s declared income or profile, as well as transactions linked to previously identified cyber fraud networks.
Customers Will Get 20 Days to Explain
Customers would get 20 calendar days to establish the legitimacy of a suspicious transaction. They could provide documents related to their identity, the purpose of the transaction and the source of the funds.
After receiving the explanation and documents, the bank would have 10 calendar days to review them. If the explanation is found satisfactory, the freeze on the relevant funds would have to be lifted immediately.
If the customer does not respond within 20 days or the explanation does not resolve the suspicion, the bank would refer the matter to the concerned police through the NCRP/CFCFRMS portal.
Proposed Rules May Start From April 2027
The RBI has released the proposed framework for public comments. The guidelines are proposed to take effect from April 1, 2027, although banks could adopt them earlier.
The proposed amendments would replace existing instructions concerning the operation of bank accounts and mule accounts under the KYC Directions, 2025.
Once a case is referred to the police, the law enforcement agency would be responsible for further action. Police would have to issue a formal statutory stay within 30 days of receiving the referral.
The proposal follows a Supreme Court order dated August 4, 2026, which directed the RBI to formulate a standard operating procedure for temporary debit freezes involving funds or accounts associated with money laundering and cyber-enabled fraud.
The proposed framework would therefore focus on freezing suspicious or disputed funds rather than automatically blocking the entire bank account.
