In recent months, Indian banks have faced a strange challenge that has slowed their chase for fresh deposits. The problem is not just competition from other financial products but also the rise of what are called mule accounts. These are bank accounts that are opened in the name of unsuspecting or vulnerable individuals and are then used by fraudsters to move illegal money.
Mule accounts have become a serious headache for banks that are already struggling to mobilize deposits in a tight financial market. With lending growing faster than deposits, banks need every rupee of savings they can gather. However, the misuse of accounts by cybercriminals has forced lenders to go slow on new account openings.
According to the Central Bureau of Investigation, there are more than 700 bank branches across India where mule account activity has been reported. In fact, investigators found over 85,000 mule accounts across the country during recent probes. These accounts are often linked to fraud schemes and online scams. They are also a major part of money laundering networks that try to push illegal funds into the financial system.
Banks say that such activity disrupts normal business and creates fear among genuine depositors. Customers often complain when their accounts are suddenly frozen or blocked due to suspected fraud. This not only damages trust in the bank but also slows the flow of fresh deposits.
The problem has grown so large that the Reserve Bank of India has flagged it as one of the major threats to financial stability. The central bank has directed lenders to strengthen their know-your-customer checks and improve digital monitoring of transactions. Despite these measures, fraudsters often find ways to trick ordinary people into sharing their documents and mobile numbers. Many victims later discover that an account has been opened in their name without their knowledge.
Banks are also facing pressure from regulators to ensure that their systems are safe. A recent case showed how a single fraud ring used thousands of mule accounts to siphon off money from multiple lenders. This has put compliance teams under stress and forced banks to rethink how aggressively they can chase deposit growth.
Experts say that the problem of mule accounts is not limited to India. In countries such as the United States and the United Kingdom, banks also face similar challenges. However, the scale of the issue in India is bigger because millions of people are entering the banking system for the first time. Many of them are not fully aware of how fraudsters operate and fall prey to false promises of easy money.
Industry observers believe that tighter cooperation between banks, regulators and law enforcement is the only way to stop this problem. Some lenders have already started using artificial intelligence tools to detect unusual transaction patterns. Others are conducting surprise checks on customer profiles to identify suspicious activity early.
Despite all these steps, banks know that the road ahead will not be easy. Deposit growth in India has been slow for the last two years, and any disruption further affects their ability to fund loans. If fraud through mule accounts continues to expand, it could undermine public faith in the banking system.
For now, the fight against mule accounts is as much about technology as it is about awareness. Banks are expected to run campaigns to educate customers about the dangers of sharing their personal information with strangers. At the same time, they must balance the need for deposit growth with the responsibility of protecting the financial system.
The battle is far from over, but banks know that ignoring the rise of mule accounts could be costlier than missing a few deposits. Trust is the foundation of banking, and without it, no financial growth can be sustained.
