Rs 22.9 cr lost in digital arrest, five banks made to pay Rs 1.3 cr to victim

Malhotra, who has also filed a criminal writ petition before the Supreme Court, told The Indian Express that he has already received the Rs 1.31 crore in the four “remitter” bank accounts from where the funds moved. He has recently filed an appeal with the RBI, demanding the full amount along with interest and damages.

A perusal of the speaking order of the RBI’s ombudsman shows that following the receipt of directions from the Supreme Court, a meeting was convened on February 20, 2026, with officials of all the remitter and beneficiary banks present to discuss “service deficiencies” in the banks. Given that Malhotra himself initiated all the transactions by visiting the branches of the banks while under digital arrest, “no service deficiency” was found in facilitation of the disputed transactions totalling Rs 22.92 crore by the remitting banks.

The order, however, notes that “few deficiencies” were observed in the manner in which the five beneficiary banks reported compliance to the current instructions on KYC/AML (anti-money laundering) and transaction monitoring.

“These deficiencies were mainly related to inadequate compliance to the KYC guidelines on operation of bank accounts and money mules and monitoring of the tractions in these accounts…,” the order stated.

The RBI’s ombudsman has penalised the five banks for being “deficient in the way mule accounts were monitored in terms of extant (valid) circulars/guidelines issued by the RBI.”

While Axis Bank, City Union Bank, ICICI Bank and IndusInd Bank were asked to pay Malhotra 5% of the amount transferred, Yes Bank was advised to “compensate”  7.5% of amounts deposited, the order stated, “on account of some additional lapses observed in monitoring of the transactions in mule/dormant accounts”.

The ombudsman also observed that “though the accounts into which the disputed amounts were transferred were used as mule account/s but considering the speed with which the transactions happened, followed by rapid transfers by layering to multiple accounts, probably it was not possible to stop the transfers by mere human interventions”.

As reported by The Indian Express on September 24 2025, the Naresh Malhotra case, while being one of the biggest individual cyber frauds in the country, also falls into the by-now familiar pattern of digital arrests where banking transactions are fragmented across the country at lightning speed.

The Indian Express had reported that until September 2025, from 21 transactions in 16 bank branches (the remitter banks), Malhotra’s money was splintered in seven layers via 4,236 transactions.

Malhotra has referred to this multiple layering of mule accounts in the appeal he has filed against the speaking order of the RBI’s ombudsman. In his appeal, he has stated that the Delhi Police probe into the 4,000-odd transactions had narrowed down to 811 mule accounts.

“The IFSO (Intelligence Fusion & Strategic Operations, Delhi Police) identified 811 mule accounts which were holding the funds fraudulently transferred from my account. These mule accounts are present across approximately 47 banks, including the paying and collecting banks,” he wrote in his letter to the RBI.

Speaking to The Indian Express, Malhotra said that since the RBI ombudsman has admitted to deficiencies of the banks in compliance with RBI’s KYC/AML guidelines, there should be complete compliance and a direct restitution of the entire defrauded sum of Rs 22.92 crore with damages, interest and liability towards capital gains tax.

His appeal stated that “the findings prove that there was a systemic failure of the banking system… any bank which did not adopt such norms and regulations is directly responsible for commissioning and perpetuating frauds of such nature… the liability of such non-complying banks is 100%.”

Malhotra pointed out that beside the Rs 1.31 crore which has been deposited in his accounts due to the order of the RBI ombudsman, an additional sum of around Rs 60 lakh has been returned to him.

“A total of Rs 2.7 crore has been frozen of the money I lost in digital arrest fraud and have got back only a small percentage. The compliance of banks is supposed to be 100%, so I will continue to fight for restitution of the full defrauded sum,” he said.