Reserve Bank of India (RBI) introduces compensation framework for digital fraud victims

Key facts

• The Reserve Bank of India (RBI) has overhauled its framework for fraudulent electronic banking transactions, applicable to Small Finance Banks and Payments Banks for transactions undertaken on or after January 1, 2027.
• Individual customers or sole proprietors suffering losses up to ₹50,000 are eligible for a one-time lifetime compensation of 85% of the net loss or ₹25,000, whichever is lower, provided the fraud is reported to the bank and the National Cyber Crime Reporting Portal or Helpline 1930 within five calendar days.
• For domestic frauds capped at ₹25,000, the compensation cost is shared among the RBI (₹19,118), the customer's bank (₹2,941), and the beneficiary bank (₹2,941).
• Customer negligence is defined as sharing passwords, PINs or OTPs, downloading malicious applications, ignoring clear scam warnings from the bank, failing to promptly report frauds or loss of cards, and not updating registered contact details.
• Bank obligations include providing 24x7 reporting channels, offering direct links on websites and mobile applications for complaints, sending instant SMS alerts for transactions above ₹500, sending email alerts for all transactions where email addresses are available, and periodically reporting fraud cases to their Boards or designated committees.
• Banks must resolve complaints within 45 calendar days for domestic fraudulent transactions and 60 calendar days for cross-border fraudulent transactions.