RBI proposes 60-day temporary debit hold on suspicious money mule transactions: Key things you need to know about RBI’s KYC directions

The Reserve Bank of India (RBI) has proposed amendments to its Know Your Customer (KYC) Directions, 2025, covering suspected money mule accounts and cyber-enabled financial frauds.

The draft RBI (KYC) Amendment Directions, 2026, proposes a uniform and time-bound standard operating procedure (SOP) for banks to place temporary debit holds up to 60 days on suspected money mule transactions or accounts and remove the hold in coordination with law enforcement agencies, wherever required.

Under the draft, if a bank’s system detects a suspicious transaction of Rs 1,000 and above, it can temporarily stop deposits. However, the bank needs to inform the customer in such a case and ask them to explain the nature of the transaction. The bank can decide whether to hold or release the transaction. It can also involve police and law enforcement agencies if the bank finds it necessary.


The proposal has come after a Supreme Court order dated August 4, 2026, which had asked the RBI to formulate and circular such a standard operating procedure (SOP).

The SOP will apply to commercial banks, payment banks, State Bank of India, small finance banks, local area banks, regional rural banks and urban cooperative banks.

The new directions are proposed to come into effect from April 1, 2027.

5 limits under the RBI KYC draft

Provision	Proposed timeline/threshold
Suspected transaction threshold	₹1,000 and above
Customer's time to explain	20 days
Bank's decision after receiving explanation	10 days
Police/authority response window after reference	30 days
Maximum temporary debit hold without contrary instruction	60 days

What is a money mule account?

According to the RBI KYC draft, a Money Mule Account means an account used, knowingly or unknowingly, to receive, layer or transfer proceeds of cyber-enabled financial fraud on behalf of another person.

When can a bank put a temporary debit hold?

When a bank identifies a suspected money mule transaction or account, it will have to act as prescribed under the SOP.

The bank will place a temporary debit hold on the suspected money mule transaction. If the entire account is identified as a suspected money mule account, the bank may place the temporary debit hold on the entire account.

The bank will notify the account holder about the temporary debit hold, the reasons for the action, the process for removal and the contact details of the concerned officer.

The notification will be sent through digital mode if the mobile number or email address is available with the bank. Otherwise, the bank will communicate via physical mode.

How much time will a customer get to explain the transaction?

The bank will seek an explanation or justification from the account holder regarding the genuineness of the transaction or account.

The bank will give an account holder a 20 days’ time from the date of temporary debit hold for submitting its explanation or justification.

After receiving the explanation, the bank will examine details and conduct due diligence, wherever required.

When will the bank remove the debit hold?

If the bank is satisfied with the explanation provided by the account holder, it will remove the temporary debit hold immediately and notify the account holder.

The bank will have to take a decision within 10 days of receiving the explanation or justification.

If no explanation is received from the account holder, the bank will take a decision within 30 days from the date of the temporary debit hold.

The bank will immediately notify the account holder about its decision to remove or continue the debit hold. If communicated digitally, the notification will be sent immediately. Otherwise, it will be sent by the end of the next day.

The bank will act immediately after receiving instructions from the LEA or Competent Authority. It will notify the account holder once the action is completed. If communicated digitally, the notification will be sent immediately; otherwise, by the end of the next day.

The bank will remove the debit hold on the 31st day from the date of reference to the LEA. It will immediately notify the account holder if communicating digitally; otherwise, the notification will be sent by the end of the next day

RBI proposes 60-day temporary debit hold

The RBI draft states that the maximum duration of a temporary debit hold, in the absence of any contrary instruction from a Law Enforcement Agency or Competent Authority, will be 60 days from the date of the temporary debit hold.

Bank account-level debit hold to be used as a last resort

The RBI draft says banks’ internal policies should include norms for placing temporary debit holds at the amount or account level and the circumstances for removing them.

The temporary debit hold at the account level should be applied as a last resort and only in exceptional circumstances, according to the proposed SOP.