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Informist, Tuesday, Sept. 15, 2026

MUMBAI – The RBI has proposed banks to formulate a Standard Operating Procedure to prescribe instructions on suspected money mule accounts to prevent cyber-enabled financial frauds, under its Know Your Customer Directions, 2025. Under the draft amendement, The central bank has proposed a maximum 60-day limit for temporary debit holds that banks can place on amounts or accounts suspected to be linked to money mule activity and cyber-enabled financial fraud, unless a law enforcement agency or competent authority orders otherwise.

Banks are required to place a temporary debit hold immediately when their transaction-monitoring systems identify a suspected money mule transaction or account, the RBI proposed. "The bank shall notify the account holder of the Temporary Debit Hold, stating reasons, the process for removal, and the concerned officer's contact details, through digital mode (if mobile number / e-mail is on record) or physical mode," it added.

The draft amendment follows a Supreme Court order dated Aug. 4 directing the central bank to adopt and circulate a standard operating procedure prescribing action to be taken by banks for placing temporary debit holds on amounts or accounts linked to money-mule activity and cyber-enabled fraud.

The draft defines a "suspected money mule transaction" as a transaction of INR 1,000 or above, flagged by a bank's transaction-monitoring systems, including artificial intelligence and machine-learning-based tools, as suspected to be linked to money mule activity or cyber-enabled financial fraud. "Temporary Debit Hold" means a temporary restriction placed by a bank on debits on suspected amount(s) or an account, pending verification of suspected money mule activity.

The proposed amendments will apply to all commercial banks, including small finance banks, payments banks, regional rural banks and local area banks, as well as urban cooperative banks. Following the temporary debit hold, the bank are proposed to give 20 days' time to the account holder for submission of the explanation or justification, it said. After this, the bank is required to take decision, within 10 days of receipt of the explanation or justification. "In case no explanation is received, the bank shall take decision, within 30 days from date of temporary debit hold," the central bank proposed. 
 

If the lender decides to continue the hold, it is required to report the matter to the jurisdictional police authority through the National Cybercrime Reporting Portal's Citizen Financial Cyber Fraud Reporting and Management System, along with the reasons. If no specific instruction requiring continuation of the hold is received from a law enforcement agency or competent authority within the prescribed period, the bank is needed to have to remove the hold on the 31st day from the date of reference to the agency, as per the draft amendments. 

"The bank shall strictly adhere to the instructions on opening of accounts and monitoring of transactions, to minimise the operations of 'Money Mules' that are used to launder the proceeds of fraud schemes (e.g., phishing, identity theft, smurfing, etc.) by criminals who gain illegal access to deposit accounts by recruiting third parties that act as ‘money mules'," the RBI said. 

The central bank has sought comments and feedback on the draft norms by Oct. 2. The RBI has proposed that the amended directions come into effect from Apr. 1, 2027, or from an earlier date if a bank chooses to implement the standard operating procedure before that.  End

Reported by Meera Nair and Pratiksha

Edited by Akul Nishant Akhoury

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