Synopsis
Hyderabad Police's crackdown on cyber fraud, revealing systemic banking gaps and Rs 400 crore annual losses, has prompted a high-level meeting. Discussions focused on coordinated action against mule accounts and faster response systems, with banks urged to adopt RBI's MuleHunter.AI tool to combat digital financial crimes.Listen to this article in summarized format
The Department of Financial Services (DFS) secretary on Thursday chaired a high-level meeting to use the learnings from the police’s crackdown to initiate a nationwide coordinated action against mule accounts – which were found to be at the centre of every case – and digital financial frauds.
Hyderabad police commissioner V C Sajjanar and top officials from the Reserve Bank of India (RBI), Central Bureau of Investigation (CBI), Indian Cyber Crime Coordination Centre (I4C), banks and other agencies attended the meeting.
The meeting emphasised real-time intelligence sharing, faster response systems and closer coordination between banks and law enforcement. Crucially, banks have been directed to adopt RBI’s MuleHunter.AI tool at the earliest.
Hyderabad police investigations under ‘Operation Octopus’ revealed that mule accounts enabled fraudsters to rapidly layer stolen money and disperse it across multiple accounts within hours, making recovery increasingly difficult once the initial transfer is made.
Sajjanar has written five letters to RBI governor Sanjay Malhotra in the past four months, with the most recent one sent on April 25.
He urged the banking regulator to plug KYC lapses and curb mule accounts.
In one case, a senior police official told ET, money from a single mule account was routed through nearly 4,500 accounts.
Hyderabad police data shows 4,430 cyber fraud cases were reported in the city in 2024, where people lost Rs 340.71 crore. In 2025, 3,733 cases saw people lose Rs 268.49 crore, while 2026 so far has recorded 1,274 cases with people losing Rs 71.32 crore.
Nationally, people lost over Rs 1.25 lakh crore between 2021–24, with more than 175,000 complaints filed each month.
However, recovery remains minimal. Just Rs 30.97 crore was refunded to victims in 2025 and only Rs 3.77 crore so far in 2026.
Hyderabad police have arrested over a hundred people since February this year, including bank officials, from across the country, looking beyond fraudsters and into the plumbing of the financial system itself.
“The sustained operation of mule accounts is impossible without active or passive complicity within the banking ecosystem,” Sajjanar wrote in one of his letters to the RBI governor.
He said there is a need for a systemic reform of the banking system to effectively curb cyber frauds, and called for tighter KYC enforcement with measures such as geo-tagged verification and stricter authentication of documents so mule accounts aren't created.
The police have also called for real-time monitoring systems to flag suspicious transaction patterns such as sudden FD closures and large withdrawals, often the last stage of digital arrest scams.
The police have proposed time-bound protocols such as lien marking within an hour of a complaint, account freezing within a few hours, etc, to improve recovery within the critical “golden hour.”
Another key recommendation is the creation of a centralised database of mule accounts, linked mobile numbers and devices to track repeat offenders across institutions.
Sajjanar has also flagged an incentive problem, with branches still measured on account volumes and sales, not account quality or fraud outcomes. His communication suggests embedding metrics such as zero mule accounts at the branch level and challenging banks to target zero cyber fraud victims among their customers.
The RBI, on its part, has issued multiple advisories on KYC compliance, mule account risks and digital fraud prevention in recent years.
Hyderabad police said the gap lies in execution at the branch level.
“Bank managers and staff were found to be insensitive, unaware of cybercrime modus operandi, and not taking immediate steps to prevent further victimisation,” Sajjanar wrote in a letter dated April 23.
The DFS meeting marks a shift from advisories to possible enforcement and better coordination amongst regulators and law enforcement agencies to curb cyber fraud. DFS has also called on state-level bankers’ committees (SLBCs) to work closely with state police and step up public awareness efforts on cyber fraud.
Meanwhile, the crackdown continues, with the next phase of Operation Octopus expected to see over 100 arrests within the banking system.
