The Reserve Bank of India issued draft KYC amendments on September 11, 2026 proposing a timetable for banks' temporary debit holds in suspected money-mule and cyber-fraud cases. Its consultation announcement invited comments until October 2 and covered commercial banks, including small finance, payments, regional rural and local area banks, as well as urban cooperative banks. Final directions were to follow consideration of feedback.
Under the draft, banks could restrain a suspicious transaction of Rs1,000 or more, or an entire account identified as a suspected money-mule account. Whole-account holds would be a last resort in exceptional circumstances. The proposed implementation date was April 1, 2027, with earlier adoption permitted.
Customers would receive reasons and an officer's contact details, and have 20 days to explain. Banks would decide within ten days of receiving an explanation, or within 30 days of the hold if none arrived. Referrals to police would trigger a further 30-day response window; without an instruction requiring continuation, the hold would be removed on day 31 after referral. The draft specified a 60-day maximum absent contrary instructions from police or another competent authority.
In a separately dated September 29 assessment, Cyril Amarchand Mangaldas lawyers Pallavi Rao, Stuti Bhargava and Tridib Mandal questioned how the draft's bank-initiated whole-account powers would fit existing judicial rulings. They contrasted the proposal with the Home Ministry's January 2 procedure, which envisaged preservation of disputed funds rather than blanket restrictions on all banking operations.
The lawyers identified two concrete unresolved issues: the draft did not define objective criteria for exceptional whole-account freezes, and a police instruction to continue a hold could remove the certainty offered by the initial time limit. They also cited Delhi and Bombay High Court decisions distinguishing a limited lien from a full freeze requiring judicial authority. Their assessment concerned the proposal, not an announced final rule.
