The Indian government is exploring a mandatory “Kill Switch” for banking and UPI apps to stop real-time financial fraud, including “digital arrests.
Government Weighs ‘Kill Switch’ to Combat Digital Fraud
A high-tech but extremely user-friendly one-tab solution to stop online frauds, especially, digital arrests that weaponise fear, is being considered by the government. The ‘kill switch’, an emergency button, would instantly freeze all financial transactions on an user’s account & give him time to seek help, explains Ojasvi Gupta
l What is the proposed ‘kill switch’
A ‘KILL SWITCH’ IS an emergency mechanism, seen as a potential solution to digital scams by its ability to stop transactions in real-time. The government is exploring the possibility of deploying such a switch in digital payment mechanisms to offer users the option to freeze outgoing transactions from their bank account or UPI app with a single action. Traditionally, fraud controls have depended on automated risk scoring or post-transaction reversal. With this real-time feature, users would be able to halt any outbound transfers if they are being rushed into a transaction or suspect any fraudulent activity, rather than waiting for a bank call centre response or filing a complaint later. “This is important given that many contemporary digital scams succeed because victims themselves authorise transactions under duress, providing OTPs or confirmations while on calls with fraudsters. The kill switch would cut off the ability to send funds almost immediately, giving users the breathing space to contact their bank, cyber-crime units, and support networks before damage is done,” a government official aware of the matter said.
l Why such a solution is being considered
In the first half of FY26, banks reported a total of 5,092 frauds, per Reserve Bank of India data, with the value of frauds rising to Rs 21,515 crore from Rs 16,569 crore in the year-ago period when banks reported 18,386 frauds. Of this, a sizeable amount is due to digital arrests where victims are kept on video calls for hours by fraudsters posing as enforcement officials, preventing them from seeking help and forcing them to transfer funds to mule accounts. A high-level inter-departmental committee (IDC) of the ministry of home affairs was constituted in December with officials from multiple agencies examining the nuances of a digital scam or fraud. As per a status report submitted in the Supreme Court recently, IDC has conducted a few meetings on methods to tackle it. The panel includes officials from various ministries as well as RBI, CBI, NIA and I4C.
l How this switch would work
THE KILL SWITCH seeks to provide unified control integrated across banking and payments apps that could cut off outgoing transaction capabilities immediately. Technically, this requires coordination between banks, UPI service providers, and the payments infrastructure to recognise a user-initiated freeze command and instantly block all outbound payment instructions. The feature would likely be placed within the app interfaces, similar to ‘freeze card’ buttons. This is said to be supported by backend rules to halt payment APIs, suspend instructions in flight, and trigger alerts to customer support and fraud teams. As per industry sources, after activation, a secure verification process would take place to unfreeze the account, possibly a biometric or in-person verification might be necessary. The inter-ministerial committee is in talks over possibilities for false activations and the need to ensure that genuine transactions are not inadvertently blocked. The need for clear protocols and standards before rollout stands out as an important task.
l Proposed fraud insurance
AUTHORITIES ARE ALSO exploring the creation of a fraud insurance or protection framework to help victims recover losses. The idea is rooted in the reality that many fraud victims lose their life’s savings and are not covered under existing cyber or payment insurance products, which exclude losses from voluntary authorisations, even if made under duress. As per sources, a pooled protection mechanism could involve contributions from banks, insurers, and possibly a regulated industry body, creating a fund that compensates victims up to defined limits. The idea is to treat digital fraud as a systemic risk rather than an individual error, akin to certain deposit insurance models. The insurance regulator would have to take the lead in such a case. The RBI’s Payment Vision 2025 report had mentioned a Digital Payment Protection Fund for security cover to defrauded customers and payment instrument issuers.
l Challenges in implementation
WHILE THE KILL switch and fraud protection frameworks look compelling, several practical challenges pop up. The topmost priority is standardisation, that is designing a kill switch that works consistently across all banks, UPI apps, and payment interfaces without fragmentation requiring industry consensus and regulatory guidance. What follows is user experience, for the feature to be such that users can trigger it under stress, without causing accidental freezes. Security considerations are just as important, the kill switch itself needs to be protected from misuse by malicious actors seeking to freeze accounts fraudulently. There needs to be a clear and fast process to verify and unfreeze accounts. On the insurance side, defining risk pools, pricing, claim validation, and avoiding moral hazard is an important task. Making sure that tools integrate with law enforcement, cybercrime units, and financial dispute resolution systems is also critical.
aniltikotekar4sme.com 