₹22.9 crore lost in digital arrest scam: RBI orders five banks to pay ₹1.31 crore to 78-year-old victim

In a rare and significant relief for a victim of a digital arrest scam, the Reserve Bank of India’s Integrated Ombudsman Scheme has directed five beneficiary banks to compensate a 78-year-old retired banker after ₹22.92 crore was siphoned off through fraudulent transactions.

The RBI ombudsman, in a detailed speaking order issued on 25 February, asked five banks — Axis Bank, City Union Bank, ICICI Bank, IndusInd Bank and Yes Bank — to collectively pay ₹1.31 crore to Delhi resident Naresh Malhotra, who fell prey to what investigators describe as the capital’s biggest digital arrest fraud.

The case, involving a staggering ₹22.92 crore loss between August and September 2025, was transferred to the CBI in late March this year.

Malhotra confirmed that the ₹1.31 crore compensation has already been credited to four remitter bank accounts from which the original funds were transferred. However, he has now appealed to the RBI, seeking full restitution of the lost amount along with interest and damages.

RBI finds lapses in mule account monitoring

The ombudsman’s order reveals that a high-level meeting was convened on 20 February 2026 following directions from the Supreme Court, bringing together officials of remitter and beneficiary banks to examine possible service deficiencies.

Since Malhotra personally visited bank branches and initiated the disputed transfers while under psychological coercion during the scam, no service deficiency was found on the part of the remitter banks in processing transactions worth ₹22.92 crore.

However, the RBI identified “few deficiencies” in the beneficiary banks’ compliance with Know Your Customer (KYC), anti-money laundering (AML), and transaction monitoring norms.

According to the order, these deficiencies were linked to inadequate adherence to KYC guidelines, poor oversight of suspicious accounts, and weak monitoring of money mule transactions.

The ombudsman concluded that the five banks were deficient in monitoring mule accounts in accordance with valid RBI circulars and regulatory guidelines.

Why Yes Bank must pay more

While Axis Bank, City Union Bank, ICICI Bank and IndusInd Bank were ordered to compensate 5% of the sums routed through their accounts, Yes Bank was directed to pay 7.5%.

The order noted that the higher compensation was due to “additional lapses” in monitoring transactions involving mule and dormant accounts.

At the same time, the ombudsman acknowledged the extraordinary speed of the fraud.

It observed that once the funds entered mule accounts, they were rapidly layered and transferred across multiple accounts, making it difficult to stop the movement through human intervention alone.

Money split into thousands of transactions

Previously reported details of the case underline the scale and sophistication of the fraud.

By September 2025, funds from just 21 transactions carried out across 16 bank branches had been fragmented into seven layers through 4,236 transactions nationwide.

In his appeal, Malhotra said the Delhi Police’s Intelligence Fusion & Strategic Operations unit traced 811 mule accounts holding money fraudulently diverted from him.

These accounts were spread across nearly 47 banks, including both paying and receiving institutions.

Victim vows to continue fight

Speaking after the RBI order, Malhotra argued that once the regulator had acknowledged lapses in compliance with KYC and AML norms, banks should be held fully accountable.

He demanded complete repayment of the ₹22.92 crore, along with damages, interest and liability arising from capital gains tax.

His appeal stated that the findings pointed to a “systemic failure of the banking system” and argued that any bank failing to comply with mandatory norms bore full responsibility.

Malhotra said that apart from the ₹1.31 crore compensation, an additional ₹60 lakh has been returned to him.

“A total of ₹2.7 crore of the money I lost has been frozen, but I have received back only a small percentage. Banks are expected to ensure 100% compliance, and I will continue to fight for full restitution,” he said.