The Rajasthan High Court has recently created guidelines to prevent banks and investigating agencies from indiscriminately freezing entire bank accounts during cybercrime investigations. At present, investigating agencies order banks to free bank accounts of suspects involved in cyber crime and banks instantly freeze the accounts. Due to this, some innocent individuals face extreme financial difficulties in case of any emergency.
Justice Anand Sharma of the Rajasthan High Court ordered that if the amount linked to a cyber fraud is identifiable, then investigating agencies and banks should place a lien or hold on that amount and allow the account holder to operate the remaining balance.
The petitioners said that in some cases of cyber frauds, the transaction involved amounts below ₹100, ₹1,000, ₹5,000 or ₹10,000. However, the entire bank accounts were frozen by banks. This caused significant hardships for the individuals.
Hearing the petitioners and after discussion on the case, the Rajasthan High Court has issued following guidelines:
Account Cannot Be Frozen Indefinitely
A bank account cannot be kept under a complete debit freeze indefinitely. If the investigation continues for a long period, the authorities must periodically review whether the freeze is still necessary.
Connection With the Cybercrime Must Be Established
Before freezing or continuing restrictions on an account, the investigating officer should identify and record material showing a prima facie connection between the bank account or a particular transaction and the offence being investigated. In simple words, there should be some reasonable basis to believe that the account or money is connected with the alleged crime.
Only the Disputed Amount Should Normally Be Held
If the amount suspected to be connected with the cybercrime can be identified, only that disputed amount should ordinarily be put on hold. For example, if ₹20,000 in an account is suspected to be linked to a cybercrime but the account contains ₹2 lakh, the entire ₹2 lakh should not normally be frozen. The restraint should generally be limited to the disputed ₹20,000.
Reasons Required for Freezing the Entire Account
There may be situations where freezing the entire account is considered necessary. This could happen because of factors such as the nature of the offence, repeated suspicious transactions, indications that the account is being used as a mule account, the account holder’s conscious involvement, or difficulty in separating the suspected proceeds of crime. However, in such cases, specific reasons for the complete freeze must be recorded and communicated to the bank.
Seizure Must Be Reported to the Magistrate
If the action amounts to a seizure under Section 106 of the Bharatiya Nagarik Suraksha Sanhita (BNSS), the seizure must be reported immediately to the competent Magistrate. Similarly, if the investigating agency wants to attach property as proceeds of crime, it must follow the procedure under Section 107 of the BNSS and approach the competent court or Magistrate.
Freezes Must Be Reviewed Periodically
A bank account should not remain frozen simply because a cybercrime investigation is still pending. The investigating officer and the supervisory officer should periodically review whether the restriction is still required. If it is found that the account holder has no connection with the offence and the disputed money does not need to be retained, the restriction should be removed immediately.
Accounts Should Be De-Frozen Without Unnecessary Delay
Once the investigation is completed, a closure report is filed, the account holder is found not to be involved, or the account or money is no longer required, instructions to remove the restriction should be issued without unnecessary delay.
Banks Must Receive Proper Details
When an investigating agency asks a bank to restrict an account, the communication should provide sufficient details, as far as legally permissible. These may include the case details, account details, disputed transaction, amount involved and legal basis for the restriction.
Banks Cannot Automatically Convert a Limited Hold Into a Full Freeze
If an investigating agency asks a bank to hold a specific transaction or amount, the bank should not automatically convert that limited request into a complete account freeze. A blanket freeze should only be imposed where the communication and supporting material legally justify such wider action.
Regulatory Restrictions Are Different
The guidelines do not mean that banks cannot impose restrictions under their own regulatory obligations. Restrictions arising from KYC requirements, anti-money laundering rules, fraud-risk management or other regulatory requirements will continue to be governed by the applicable laws and RBI directions. Banks must clearly distinguish between restrictions imposed under their own regulatory responsibilities and restrictions imposed at the request of police or cybercrime investigating agencies.
Grievances Must Be Properly Considered
Banks and investigating agencies must also follow the grievance-redressal mechanism under Clause 10 of the Standard Operating Procedure dated January 2, 2026. A grievance should not be ignored simply because the cybercrime complaint was registered or originated in another State.
Electronic Verification Should Be Preferred
Wherever practical, grievances of account holders should ordinarily be verified through electronic means or video conferencing. Personal appearance should only be required when it is genuinely necessary for the investigation, and the reasons for requiring such appearance should be recorded.
What This Means for Bank Customers
The main purpose of these guidelines is to ensure a balance between cybercrime investigations and the financial rights of innocent bank customers. Investigating agencies can take necessary action against accounts genuinely linked to cybercrime, but an innocent person’s entire bank balance should not be blocked indefinitely without proper reasons.
In simple terms, if only a particular amount is suspected to be connected with a cybercrime, the authorities should normally restrict that amount instead of freezing the person’s entire account.
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