RBI Cyber Fraud Rule will bring relief to bank customers by limiting restrictions to the disputed amount instead of automatically freezing the entire account in cases involving suspected cyber fraud.
The new framework is expected to make the process more targeted and customer-friendly.
RBI Cyber Fraud Rule Changes Account Freeze Process
Under the proposed framework, when a transaction is flagged because of suspected cyber fraud or links to a mule account, banks will focus on the amount connected to the disputed transaction.
This means customers may continue using the undisputed balance in their bank accounts, instead of losing access to their entire funds simply because one transaction has been flagged.
Only Disputed Amount Will Face Restriction
The key change is that banks will place a hold or lien on the disputed amount where it can be clearly identified.
The remaining balance can continue to remain available to the account holder, subject to applicable legal directions.
The approach is intended to prevent situations where a relatively small disputed transaction results in the complete freezing of an account containing much larger legitimate funds.
RBI Plans Faster Cyber Fraud Detection
The new framework also focuses on improving the identification of suspicious transactions.
Artificial intelligence may be used to help detect potentially fraudulent activity and identify transactions that require investigation.
Customers will also get an opportunity to explain the transaction and complete the required process.
The reported framework provides a 20-day period for the customer to respond or cooperate.
What Happens If Fraud Is Confirmed
If the customer does not cooperate or the investigation finds evidence of wrongdoing, the matter can be taken forward to the police or the appropriate authorities.
The new approach is aimed at balancing two concerns: allowing agencies and banks to act quickly against cyber fraud while protecting genuine customers from unnecessary restrictions on their legitimate money.
When Can the Entire Account Be Frozen
A complete account freeze may still be required in exceptional circumstances where the nature of the suspected activity justifies wider restrictions.
Therefore, the new framework does not mean that every account connected to a cyber fraud complaint will remain fully operational.
The focus is instead on making account restrictions proportionate to the suspected transaction and preventing a transaction-specific complaint from automatically resulting in a blanket freeze.