The Reserve Bank of India has proposed a 60-day cap on temporary debit holds imposed on bank accounts suspected of money mule activity or cyber fraud, seeking to establish a uniform procedure for banks handling suspicious transactions.
The proposal is part of the RBI (Know Your Customer) Amendment Directions, 2026. It follows an August 4, 2026 direction from the Supreme Court asking the central bank to prepare a standard operating procedure for money mule cases.
How Will the 60-Day Hold Work?
Under the proposed framework, a bank’s fraud-detection system, which may use artificial intelligence, can flag a transaction worth ₹1,000 or more as suspicious. The bank can then place a hold on the identified amount or the account.
The customer must be informed immediately through SMS or email. If only postal communication is possible, the notice must be sent by the next working day.
Once the process begins, the account holder gets 20 days to explain the transaction. If the customer responds, the bank must decide within 10 days. If there is no response, the bank gets 30 days to make its decision.
If the bank chooses to continue the freeze, it must report the matter to police through the government’s cybercrime portal. The hold will automatically end on the 31st day unless investigators direct otherwise.
Full Account Freeze to Be a Last Resort
The proposed framework is not limited to major banks. Small finance banks, payments banks, regional rural banks and urban cooperative banks are also covered by the draft.
The proposal deals with account-level and transaction-level holds rather than specifically targeting debit cards. It also states that freezing an entire account should be treated as a last resort rather than the default response.
Banks will continue to file Suspicious Transaction Reports as usual, alongside the proposed procedure for handling suspected money mule and cyber fraud transactions.
Proposed Rules Could Take Effect in April 2027
If the draft is implemented without changes, the framework will take effect from April 1, 2027. Banks will, however, be allowed to adopt the procedure earlier.
The proposal seeks to give banks a common rulebook for dealing with suspicious accounts while setting clear timelines for communication and review. It defines how quickly customers must be informed, how long they have to respond, when banks must make decisions and when continued restrictions require police involvement.
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