Behind The Click: Cyber Fraud & Cybercrime

UPI and the Rise of Cybercrime in India

In recent years, India has emerged as one of the world’s leaders in digital payments, with the Unified Payments Interface (UPI) playing a transformative role in reshaping the financial landscape. Introduced by the National Payments Corporation of India (NPCI) in 2016, UPI has enabled real-time, seamless, and low-cost peer-to-peer and peer-to-merchant transactions.

Its widespread adoption, especially during and after the COVID-19 pandemic, brought financial inclusion to millions. However, this digital boom has also given rise to an alarming increase in cybercrimes, most notably UPI-related frauds, phishing scams, and unauthorized bank account freezing, affecting the common man with far-reaching financial and psychological consequences.

Forms of UPI Frauds

UPI frauds have taken various forms, all rooted in exploiting user trust and lack of digital awareness. Common tactics include:

• Phishing: Users are tricked into sharing credentials through fake links or fraudulent calls posing as customer service representatives. Scammers convince victims to click on malicious links or download remote access apps, gaining control over their phones and UPI apps.
• QR Code Scams: Victims are sent QR codes under the pretense of receiving money. Scanning these codes results in a debit transaction from the victim’s account.
• Fake Merchant IDs: Impersonation using fake UPI IDs, especially on e-commerce resale platforms.
• KYC Verification Scams: Threats of service disruption unless users provide sensitive account information — often leading to unauthorized withdrawals.

Account Freezing by Law Enforcement

One particularly distressing and growing issue is the arbitrary freezing of bank accounts by law enforcement agencies in connection with alleged cybercrimes. In many cases, accounts are frozen simply because fraudulently obtained funds have been transferred into them — often without the knowledge or involvement of the account holder.

These accounts are frequently used as “mule accounts” by cybercriminals, either created with forged documents or misused through hacked digital identities.

Unfortunately, genuine users face sudden restrictions on access to their funds without prior notice or an opportunity to be heard. For salaried individuals, small businesses, and students, this can mean disruption of livelihood and irreparable reputational harm.

What exacerbates the problem is the bureaucratic inertia on the part of both banks and law enforcement, who often take weeks or even months to unfreeze accounts — even after a clean explanation or proof of non-involvement is submitted.

Legal Framework

The legal framework dealing with UPI frauds and cybercrime in India is primarily governed by:

• The Information Technology Act, 2000
• Provisions of the Bhartiya Nyaya Sanhita 2023 (earlier Indian Penal Code, 1860)

Additionally, banks, NBFCs, and digital platforms are required to follow RBI regulations, which mandate the reversal of unauthorized transactions if reported within a specific window — usually three working days.

Victims are also entitled to approach the Ombudsman under the RBI’s Digital Transactions Redressal mechanism.

Challenges in Seeking Justice

Despite the availability of these provisions, the process of securing justice remains complex and burdensome. A victim of UPI fraud is expected to:

• Dial the national cybercrime helpline 1930
• Register a complaint at www.cybercrime.gov.in
• Lodge a First Information Report (FIR) at the local police station
• Inform the bank in writing

While this may sound straightforward, many victims face:

• Refusal from police stations to register FIRs, especially in low-value cases
• Delays from banks citing technical or procedural hurdles in reversing funds or unfreezing accounts
• Difficulty in retaining digital evidence like transaction IDs, chats, and call recordings, further weakening their claims

Innocent account holders whose accounts are frozen due to alleged receipt of fraud money often find themselves in a legal grey area. These individuals can submit a written representation to the Investigating Officer or police station asserting their innocence. If that fails, they have the legal remedy of filing a writ petition before the concerned High Court, seeking directions for de-freezing and restoration of access to their own lawful property.

Certain provisions of the Bharatiya Nagarik Suraksha Sanhita, 2023 (earlier Code of Criminal Procedure, 1973), may also be invoked for release of attached property or custody of frozen assets. In some cases, if the conduct of the bank is arbitrary or unreasonable, a consumer complaint for deficiency in service can also be pursued before a consumer forum.

Despite having laws in place, ground-level enforcement remains inadequate. Police departments, especially at the district level, often lack the technological capacity and training to investigate cybercrime efficiently. Digital forensics takes time, and inter-state coordination is poor — a major problem since most cybercriminals operate across state borders. Language barriers, a lack of digital awareness among common users, and inadequate response from customer care units of banks make redressal even more difficult.

There is no unified system in place for real-time blocking or recalling of UPI funds across banks, which could prevent further loss if a fraud is reported quickly.

To address this crisis effectively, India needs a multi-pronged and systemic approach. Legal reforms must include:

• Mandatory guidelines on freezing bank accounts, with a requirement of notice and hearing.
• Fast-track courts for digital frauds.
• A policy mandating FIR registration for all digital financial crimes above a certain threshold.

Simultaneously, law enforcement officials, judicial officers, and banking personnel must undergo regular training on digital evidence handling and cyber law enforcement. The Government of India is working extensively in creating public awareness on various facets of online financial frauds and crimes and it needs to be commended for its remarkable awareness programs. Examples include:

• Information Security Education Awareness (ISEA)
• Various quizzes and competitions by MyGOV
• Initiatives by the Ministry of Electronics & Information Technology
• The Computer Emergency Response Team of India (CERT-In)
• The Reserve Bank of India (RBI)

UPI applications should also be mandated to display alerts and warnings when scanning QR codes or making high-value payments.

In addition, financial institutions such as banks and NBFCs have a central role to play. Banks must adopt robust, AI-powered fraud detection systems capable of flagging suspicious activity in real time. There should also be a well-defined interbank fund recall mechanism which can halt or reverse transactions the moment a complaint is raised.

In conclusion, the digital revolution in payments has significantly advanced financial inclusion in India, empowering millions with easy and instant access to financial services. To sustain and build upon this progress, it is essential to strengthen the infrastructure that safeguards digital consumers.

Ensuring public trust in digital financial systems requires a proactive and coordinated approach—anchored in robust legal safeguards, responsive institutional mechanisms, responsible financial sector practices, and comprehensive digital literacy. With the right protections in place, India can continue to lead the way in Fin-Tech innovation while ensuring that every citizen participates safely and confidently in the digital economy.

About The Author
Lalit Sharma is a practicing Advocate at the Hon’ble Delhi High Court and its subordinate courts, with expertise in civil, matrimonial, and Cyber matters. He holds an LL.B. Degree from Chaudhary Charan Singh University, Uttar Pradesh, and is currently pursuing his LL.M. Degree from the same university.

With a background in humanities and a Post Graduate Diploma in Computer Applications (PGDCA), he combines legal knowledge with technical proficiency.

He is actively engaged with Delhi-based NGOs on socio-legal issues and social upliftment, with strong experience in legal research, litigation, and court procedures. He is dedicated to building his career in the evolving field of law, with a focus on the intersection of law and technology.

He is currently working as a Legal Associate at a Law Office headed by a highly experienced Advocate with over 42 years of practice, specializing in civil and matrimonial disputes before the Hon’ble Supreme Court, the Hon’ble Delhi High Court, and its subordinate courts.

Connect with Advocate Lalit Sharma @ linkedin.com/in/lalitsharma9.