Petrol pump operators in Tamil Nadu have threatened to stop accepting UPI and other digital payments across the state. They are alleging that the automated machinery of India’s cybercrime-investigation system is flagging their bank accounts as suspects in cybercrime cases as possible mule accounts. This has resulted in the freezing of their bank accounts.
The New Indian Express (TNIE) reported this first, citing Tamil Nadu Petroleum Dealers Association (TNPDA) president KP Murali’s letter to the Chief Minister. According to TNIE, the association’s roughly 5,000 outlets across the state process 200-500 digital transactions a day on average. Digital payments now account for more than half of revenue at some stations. Murali told the TNIE that banks were placing liens on dealers’ accounts, and in some cases freezing entire accounts, on instructions from cyber-crime authorities investigating disputed transactions.
Association president described these actions as “disproportionate to the underlying disputes.” The TNIE report also cited “cases of dealers being picked up during early morning hours and held for questioning without being told the specifics of the transaction under investigation.” The Tamil Nadu Petroleum Dealers Association (TNPDA) wrote a letter to Chief Minister C. Joseph Vijay, seeking reliefs.
Earlier in May 2025, the Vidarbha Petroleum Dealers Association (VPDA) announced that fuel stations in Nagpur would stop accepting UPI and card payments, citing a wave of bank-account freezes linked to cybercrime complaints. MediaNama, which first reported the development, recorded the association’s reasoning in its press release.
“A truck comes to a pump on a highway, and its owner pays for it from Rajasthan, Delhi, Punjab, or some other state. And, the next day, cybercrime in that state orders us to freeze our money.” – a petrol pump owner.
A later statement from Amit Gupta, president of the Federation of All Maharashtra Petroleum Dealers Association (FAMPEDA), put the figure at “nearly 30 petrol stations” with liens. “In two cases, the accounts were completely blocked”, said Gupta. Nashik’s Petrol Dealers’ Association also cautioned members over digital payments.
How authorities are catching mule accounts: In December 2024, the Reserve Bank Innovation Hub (RBIH), a subsidiary of the RBI, launched MuleHunter.AI, an AI/ML-based tool designed to detect and flag mule bank accounts. Mule accounts refer to the accounts used to receive and layer fraudulent funds before they are moved out of the financial system. RBIH argued that the older static-rule-based system “result in[ed] in high false positives and longer turnaround times, causing many such accounts to remain undetected.”
“…It’s a matter of speed versus accuracy and clarity, calling for the establishment of a set of guidelines to prevent erroneous harm to people’s accounts, preventing them from making legitimate transactions. However, the very idea of determining the legitimacy of a transaction and ensuring that it isn’t a mule account takes time and therein lies the conundrum—one needs speed to freeze bank accounts while, at the same time, ensuring accuracy to prevent harm to legitimate users.” – Nikhil Pahwa (March 2025).
What are the guidelines for freezing bank accounts: Acting on the Delhi High Court’s direction, the Ministry of Home Affairs (MHA) issued the SOP for NCRP-CFCFRMS on January 2, 2026. The MHA’s SOP sets out how the process is meant to work in cybercrime cases.
“Putting on Hold of suspicious transactions and beneficiary account identification reported on CFCFRMS is done to prevent reported amount from being laundered and irretrievably lost in the exercise of powers under S. 168 read with S. 94 BNSS and under S. 106 BNSS” – MHA’s SOP for NCRP-CFCFRMS.
On the freezing question specifically, the SOP distinguishes between a “put on hold” of a disputed amount and a full seizure of a bank account.
- Section 5(ix) of the SOP directs officers to ensure “judicious use of the platform,” and states that “unwarranted orders for freezing accounts shall be discouraged, and accountability measures shall be established.”
- Section 5(viii) requires Investigating Officers to “conduct verifications with the account holder and their bank and give a reasonable opportunity to submit an explanation for the disputed transaction” before issuing an order under Section 106(3) BNSS.
The SOP also creates a tiered grievance structure. At the lowest level, aggrieved account holders approach their bank branch and banks are expected to escalate grievances through the Grievance Redressal Module within seven calendar days. The Investigating Officer (IO) must respond within 15 calendar days. If the IO fails to do so, the grievance is auto escalated to a District Grievance Officer. A State-level Grievance Officer of ADG/IG rank sits above that, and a bank or FI’s decisions can be appealed through to the jurisdictional Court. Similarly, the SOP also documents guidelines for the lower values.
For disputes that remain unresolved through the grievance process, the SOP provides an auto-release mechanism. If no lawful directions regarding the continuation of the hold are received within 90 calendar days of the grievance being submitted, the bank is supposed to unfreeze the accounts.
This overalll mechanism functions through National Cyber Crime Reporting Portal (NCRP) and its financial-crime module, the Citizen Financial Cyber Fraud Reporting and Management System (CFCFRMS). The MHA’s Indian Cyber Crime Coordination Centre (I4C) operates both.
In a LiveLaw article, advocate Vikram Singh Kushwaha identified five gaps in the current system, he said:
- SOPs lack statutory mandates: “A bank that receives a lien instruction from a cyber cell in another state, drafted in a form that pre-dates the SOP and does not mention the disputed sum, has not historically refused that instruction on the ground that it is non-compliant with an MHA circular. It has acted on it.”
- No meaningful prior intimation: “The customer normally finds out about the freeze by discovering that a transaction has failed. There is no prior intimation, no opportunity to be heard, and no contemporaneous explanation of the basis for the action.”
- Jurisdictional limitations in inter-state matters: “The SOP improves grievance redressal within a state. It does very little for the inter-state customer caught between two of them.”
- Freezes may continue until investigation finishes: Above Rs. 50,000, “the SOP relies on the general criminal-procedure framework, in which the lien continues until investigation is completed or a court orders otherwise.”
- Bank-side communication gaps: “Customers learn about freezes through inconsistent or unintelligible SMS messages. Branches are unable, or unwilling, to identify which authority instructed the action.”
The advocate Kushwaha’s recommendations include a mandatory 48-hour communication from the bank, an inter-state grievance mechanism under I4C. “The January 2026 SOP is a genuine and overdue corrective measure, but it remains an administrative instruction layered over a system that still treats the innocent account holder as collateral rather than a stakeholder,” he wrote.
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