Lok Sabha Question No. 3867 (UNSTARRED), answered on 2026-03-16
Subject: Misuse of Mule Accounts for Diversion of Funds
Ministry: FINANCE
Asked by: Shri Kali Charan Singh

## GOVERNMENT OF INDIA MINISTRY OF FINANCE DEPARTMENT OF FINANCIAL SERVICES

## LOK SABHA UNSTARRED QUESTION NO. 3867

ANSWERED ON MONDAY, MARCH 16, 2026/PHALGUNA 25, 1947 (SAKA)

## Misuse of Mule Accounts for Diversion of Funds

## 3867. SHRI KALI CHARAN SINGH:

Will the Minister of FINANCE be pleased to state:

- (a) whether the Government has taken any cognizance of the large-scale misuse of mule accounts for diversion and layering of funds in cyber frauds across the country;
- (b) if so, the number of such mule accounts identified and frozen during the last three years, bankwise and State-wise;
- (c)  whether  investigations  have  revealed  alleged  involvement  of  officials  of  certain  banks, including officials of RBL (Ratnakar Bank Limited) at Surat, Gujarat, in facilitating the opening or  operation  of  mule  accounts  in  violation  of  KYC/AML  (Know Your  Customer/Anti-Money Laundering) norms;
- (d) if so, the action taken against such officials, including arrests, suspensions or departmental proceedings;
- (e) the steps taken by the Government and the Reserve Bank of India to fix accountability of senior management and strengthen monitoring systems to prevent fund diversion through the banking channel; and
- (f) the details of proposal made by RBI to provide relief to customers/victims against such frauds?

## ANSWER

## THE MINISTER OF STATE IN THE MINISTRY OF FINANCE

## (SHRI PANKAJ CHAUDHARY)

(a) & (b): With the rapid increase in digital payment transactions, instances of digital payment fraud have also risen. The Government has been constantly engaging with the Reserve Bank of India (RBI) and other concerned Regulators/ stakeholders. To curb the misuse of mule accounts for  diversion  and  layering  of  funds  in  cyber  frauds  across  the  country,  RBI  has  rolled  out 'MuleHunter.AI'  an  artificial  intelligence/  machine  learning-based  solution  for  mule  account detection. The solution is currently live in 26 banks and is being scaled up further. RBI has also issued advisories delineating specific actions to be taken by the banks in mitigating the misuse of banking channel through robust systems and controls for the prevention and detection of cyber enabled frauds & suspected money mules., Financial Intelligence Unit (FIU-IND) has issued a detailed guidance/advisory document on mule accounts, which included common characteristics/financial  signature of mule  accounts and various technology-based solutions on detection and suppression of mule accounts.

Further, the banks have been advised to ensure deployment and adoption of robust software for real-time transaction monitoring and use of AI / ML tools in detecting suspicious and fraudulent transaction patterns as well as use of network analytics in identifying mule networks. (c) & (d) Ratnakar Bank Ltd (RBL) has informed that based on the police investigations, eight employees (including one erstwhile employee) were arrested by the Udhna Police, Surat on July 29, 2025, for allegedly facilitating the sourcing of mule accounts and receiving monetary benefits. Further,  RBL  based  on  its  internal  investigation  has  initiated  actions  against  staff/employees involved with such activities including termination of such employees. (e)  As per RBI' Master Directions on Fraud Risk Management, all Commercial Banks are required to  have  in  place  a  Board-approved  Policy  on  fraud  risk  management,  delineating  roles  and responsibilities of Board/Board Committees and Senior Management. Banks are also required to set-up an appropriate organisational structure for institutionalisation of fraud risk management. Banks are also required to immediately report the incidence of fraud to law enforcement agencies. Further, RBI has also issued various confidential advisories delineating specific actions to be taken by  the  banks  in  mitigating  the  misuse  of  banking  channel,  including  initiation  of  criminal proceedings under the Prevention of Corruption Act 1988, wherever there is sufficient evidence that mule accounts are opened by banks staff in connivance with the fraudsters.

(f) To help customers recover the loss on account of fraudulent transactions, RBI vide circular dated 6th July, 2017 issued instructions to the banks on limiting the liability of customers (viz. Zero  liability,  Limited  liability  and  Liability  as  per  Board  approved  policy)  in  cases  of unauthorised  electronic  banking  transactions.    RBI  has  also  conducted  public  awareness campaigns (PACs) on the theme of Money Mules. These PACs have been launched through TV, print, digital and SMS modes in 2024.

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