Under the draft Reserve Bank of India (Know Your Customer) Amendment Directions, 2026, banks would have to place a temporary debit hold immediately when their transaction-monitoring systems identify a suspected money mule transaction or account.
The framework has been proposed following the Supreme Court’s August 4, 2026 order directing the RBI to formulate a Standard Operating Procedure (SOP) for such cases.
The proposed framework covers commercial banks, including small finance banks, payments banks, regional rural banks and local area banks, as well as urban cooperative banks.
The draft defines a “Suspected Money Mule Transaction” as a transaction of ₹1,000 or more flagged by a bank’s transaction-monitoring systems, including AI and machine-learning-based tools, as suspected to be linked to money mule activity or cyber-enabled financial fraud.
A transaction could be flagged if it is unusual or disproportionate to the account holder’s declared profile, or if it is linked to an account already reported as a money mule or fraudulent account.
How the 60-day process will work
Once a suspected transaction or account is identified, the bank would immediately place a temporary debit hold on the suspected amount. If the entire account is identified as a suspected money mule account, the bank could place the hold on the entire account.
The bank would also have to immediately notify the account holder through digital channels where a mobile number or email address is available. If communication is through physical mode, the notification would have to be sent by the end of the next day.
The account holder would get 20 days from the date of the temporary debit hold to submit an explanation or justification regarding the genuineness of the transaction or account.
If an explanation is received, the bank would have to take a decision within 10 days of receiving it. If the bank is satisfied with the explanation, it would remove the temporary debit hold immediately.
If no explanation is received, the bank would have to take a decision within 30 days from the date of the temporary debit hold. If it decides to continue the hold, it would report the matter to the jurisdictional police authority through the National Cybercrime Reporting Portal’s Citizen Financial Cyber Fraud Reporting and Management System (NCRP-CFCFRMS), 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 would have to remove the hold on the 31st day from the date of reference to the agency.
The draft therefore sets the maximum duration of a temporary debit hold, in the absence of a contrary instruction, at 60 days from the date of the initial hold.
No separate debit-card rule
The draft does not specifically prescribe a new restriction or procedure for debit cards. The proposed measure applies to debits from bank accounts or specified amounts, rather than creating a separate debit-card blocking mechanism.
An account-level temporary debit hold could consequently affect debit transactions through channels linked to that account, including potentially debit-card transactions. However, the draft does not specifically state that a debit card must be blocked or suspended.
The RBI has proposed that an account-level temporary debit hold should be used as a last resort and only in exceptional circumstances. Banks would have to frame internal policies with objective parameters aimed at reducing the risk of genuine transactions or accounts being incorrectly flagged.
Banks to continue filing suspicious transaction reports
The proposed SOP does not change banks’ existing obligations under the Prevention of Money Laundering Act, 2002, or the RBI’s KYC Directions.
Banks would continue to file Suspicious Transaction Reports (STRs) with the Financial Intelligence Unit-India (FIU-IND) under existing requirements. The amended KYC Directions also state that if an account is established to be a money mule account but the concerned bank did not file an STR, it would be deemed non-compliant with the directions.
Banks would also have to maintain a centralised record of temporary debit holds, including the reasons for the hold, communications with customers, references and reports made to law enforcement agencies, directions received and the eventual release or continuation of the hold.
Records relating to such cases would have to be retained for at least five years from the date of the temporary debit hold, and for at least 10 years from account closure.
The RBI has proposed that the amended directions come into effect from April 1, 2027, or from an earlier date if a bank chooses to implement the SOP before then.
