In an advisory, the Indian Embassy here said it has received recurring complaints by Indian tourists of being "duped by unscrupulous elements" involving jet ski rentals "particularly in Pattaya".
The beach town, Pattaya, is hugely popular among Indian tourists and is usually a part of all package tours to Thailand.
The scam, which has been continuing for years despite police complaints, usually unfolds when the unsuspecting tourist goes to return the rented jet ski.
In many cases, the victims are intimidated into settling on the spot rather than going to police.
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"Tourists also claim to be threatened with harm to their self and family members, their passports withheld if they don't pay large sums of money," the advisory stated.
Embassy officials said they have brought the matter to the attention of "competent authorities" but still advised its nationals "to exercise due caution... While hiring, if they have to, jet skis".
The public advisory was issued after the Indian government wrote a letter to the Thai Ministry of Foreign Affairs last month about the continuing scams, which in recent years have been perpetrated mostly against non-Western tourists.