Businessman gets ₹23L via RTGS, bank freezes his account over income mismatch; HC rules in his favour — here's why

A businessman who operates in the fish machinery segment received ₹ 23 lakh in his bank account via RTGS on January 16, 2026. Shortly after the money was credited, the bank froze his account, citing a mismatch between the deposit amount and the income he declared when opening the account.

The bank noted that the customer had declared an annual income of ₹ 5.76 lakh when he opened the account, making the ₹ 23 lakh real-time gross settlement (RTGS) deposit appear suspicious, according to a report by The Economic Times .

The matter eventually reached the Allahabad High Court, where the bench held the bank responsible for its arbitrary decision, ruling in the businessman's favour. It even directed the bank to compensate him for the inconvenience caused.

After hearing both sides, the Allahabad High Court’s Lucknow bench ruled that the bank must pay ₹ 50,000 as a compensation for freezing the said customer’s bank account without any valid reason. They also stated that this amount must be given to the account holder within four weeks.

The court also flagged serious concern over what it called a growing and troubling tendency among banks to freeze customers’ accounts based on suspicion alone.

It stressed that while banks are custodians of public funds, they cannot assume the role of investigative agencies and restrict access to a customer's funds without sufficient justification.

The bank said that it froze the businessman's account under Prevention of Money Laundering Act, 2002 (PMLA). However, the Allahabad High Court rejected this justification, observing that the freeze was not based on any cybercrime alert or direction from a competent authority. Instead, the action was taken solely on the bank's own assessment, as reported by LawChakra .

The high court also clarified that banks cannot independently investigate or decide whether the funds are legitimate. Such decisions can only be taken when they are acting on instructions received from legally empowered agencies such as the police, the Enforcement Directorate ( ED ), or the Central Bureau of Investigation (CBI).

Stating that banks do not have the authority to make decisions on behalf of investigative agencies, it further noted, if any bank works beyond this mandate, then it will be considered an overreach. Moreover, the Allahabad High Court observed that such practices of freezing bank accounts are becoming more common and this is a cause for concern.

Thus, the high court warned that arbitrary freezing of accounts can severely disrupt business activities, damage the financial credibility of account holders, and undermine overall economic stability, the news report stated.

Eshita Gain is a digital journalist at Mint, where she joined in May 2025. She writes on corporate developments, personal finance, markets, and business trends, with a focus on delivering timely and relevant stories to a broad audience. <br><br> While her core beat lies in business and finance, she is not confined to a single niche and frequently explores stories across domains, including international relations and policy developments.