One-button freeze for bank accounts? How a kill switch, fraud insurance could reshape India’s fight against digital scams

The proposal is being discussed by an inter-departmental committee formed in late December to address the growing threat of so-called ‘digital arrest’ scams

• MHA panel mulls "kill switch" to stop banking amid suspected digital fraud.
• Committee explores insurance to cover losses from rising digital scams
• India saw 23,879 fraud cases worth Rs 34,771 crore in 2024-25

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A high-powered committee set up by the Ministry of Home Affairs (MHA) is examining the introduction of a "kill switch" feature that could allow users to instantly halt all banking transactions if they suspect they are being targeted by a digital scam, an Indian Express report said on Wednesday.

The proposal is being discussed by an inter-departmental committee formed in late December to address the growing threat of so-called "digital arrest" scams. One of the ideas under consideration is an emergency control built into banking and payment applications that would immediately freeze all outgoing transactions at the user's request, the Indian Express said, citing officials familiar with the deliberations.

The concept involves integrating a single-button option within UPI or bank apps, enabling customers to stop all financial activity the moment they sense fraud. A senior government official told the Indian Express that the committee is also exploring whether potentially fraudulent transactions can be flagged early and prevented from being rapidly dispersed across multiple mule accounts.

In parallel, the committee is evaluating the possibility of introducing an insurance-based framework to cover fraud-related losses within the banking system. With digital frauds rising sharply, banks are being pushed to rethink existing risk-management approaches to better safeguard customers and maintain systemic stability, officials involved in the discussions told the Indian Express.

Digital arrest scams typically involve fraudsters posing as police or other law enforcement officials over video calls, falsely claiming that victims are under investigation for serious offences. Using leaked personal information, fake arrest warrants and fabricated IDs, scammers create fear and urgency, often coercing victims into transferring large sums of money over extended calls. Losses from such scams across India are estimated at nearly Rs 3,000 crore, a scale that led the Supreme Court to take suo motu cognisance of the issue last October, the Indian Express noted.

The inter-departmental committee was constituted in December and includes senior officials from multiple ministries and agencies, including MeitY, DoT, DFS, RBI, CBI, NIA, Delhi Police and the Indian Cyber Crime Coordination Centre (I4C). The panel is chaired by the Special Secretary (Internal Security), MHA, with the CEO of I4C serving as Member-Secretary. A recent status report submitted to the Supreme Court confirmed that the committee has already held several meetings to deliberate on the matter, the Indian Express reported.

Separately, MeitY convened a meeting with major technology platforms and intermediaries earlier this month, attended by representatives from Google, WhatsApp, Telegram and Microsoft, along with officials from the MHA, DoT and I4C, the newspaper said.

The Indian Express also reported that discussions are underway on whether insurance can play a more formal role in managing fraud-related risks in the banking system. As digital payments and mobile banking expand rapidly, cyber-enabled frauds, phishing attacks, account takeovers and mule account networks have become increasingly complex and difficult to contain.

At a recent financial sector event, RBI Deputy Governor T Rabi Sankar raised questions about the adequacy of existing risk-transfer tools and whether insurance solutions could help address rising fraud losses. RBI officials have since engaged with stakeholders on the subject, sources told the Indian Express, although no formal proposal has yet been submitted to leading insurers. An official from a public sector insurance company said any such move would require the insurance regulator IRDAI to take the lead.

RBI data cited by the Indian Express shows that 23,879 fraud cases involving Rs 34,771 crore were recorded in 2024-25. The central bank's Payment Vision 2025 document has also proposed studying the feasibility of a Digital Payment Protection Fund to provide cover for defrauded customers and payment system participants.

Experts quoted by the Indian Express suggest that a pooled insurance model-funded by banks and insurers and supported by regulation-could help spread fraud risk across the financial system, similar to terrorism insurance pools used in other countries. Ranjeeth Bellary, Partner at EY Forensic and Integrity Services-Cyber Forensics, said existing cyber insurance products do not adequately cover losses arising from customer manipulation rather than system breaches.

Such measures, if implemented, would signal a shift toward treating digital fraud not just as a compliance issue but as a broader balance-sheet and systemic risk, strengthening the resilience of India's rapidly digitising financial ecosystem, the Indian Express said.