RBI Bank Account Freeze Rules may soon provide relief to customers facing cyber fraud or suspicious transaction cases.
Under the proposed framework, banks may not be allowed to freeze an entire account merely because a suspicious transaction is detected.
Instead, banks would temporarily freeze only the amount linked to the disputed or suspected cyber fraud transaction, while the remaining account balance could continue to be used.
RBI Bank Account Freeze Rules Target Suspicious Amount
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 continue to operate. This approach is aimed at preventing the entire account from being blocked when only a specific transaction is under suspicion.
Banks Will Use AI to Detect Fraud
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 transaction pattern.
They would also monitor transactions that appear disproportionate to the customer’s declared income or profile, along with transactions connected to previously identified cyber fraud networks.
The RBI has released the proposed rules for public comments. The framework is proposed to take effect from April 1, 2027, although banks could adopt it earlier.
The proposed amendments would replace existing instructions on the operation of bank accounts and mule accounts under the KYC Directions, 2025.
Customers Will Get 20 Days to Explain
Customers would get 20 calendar days to establish the legitimacy of a suspicious transaction. They could submit documents related to their identity, the purpose of the transaction and the source of the funds.
After receiving the customer’s explanation and documents, the bank would have 10 calendar days to review them. If the explanation is satisfactory, the freeze on the relevant funds would have to be lifted immediately.
Police Will Handle Unresolved Cases
If a 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.
The bank would not be able to keep the funds frozen indefinitely after the referral. The responsibility would then shift to the law enforcement agency.
The police would have to issue a formal statutory stay within 30 days of receiving the referral. The proposed framework therefore focuses on restricting suspicious funds rather than automatically blocking the customer’s entire account.
The RBI said the proposal was formulated following a Supreme Court order dated August 4, 2026.
The order directed the RBI to formulate and issue a Standard Operating Procedure for temporary debit freezes involving funds or accounts linked to money laundering activities and cyber-enabled fraud.
