RBI monetary policy: Small digital fraud victims to get up to ₹25K refund

RBI has announced a one-time compensation of up to Rs 25,000 for victims of small-value digital frauds, while also moving to tighten norms on mis-selling and loan recovery practices

In a first-of-its-kind move, bank customers who fall victim to small-value digital frauds will be eligible for compensation of up to ₹25,000 for the first such incident, the Reserve Bank of India (RBI) announced on Friday. 

The proposed compensation will be a one-time relief and will cover up to 85 per cent of the amount lost, or ₹25,000, whichever is lower, said RBI Governor Sanjay Malhotra during a media interaction following the monetary policy announcement. 

“…as long as (customers) are defrauded, whether on their own accord or someone else’s, no questions asked, we will compensate them as long as it is unintended,” he said. 

 

A substantial portion of the compensation will be borne by the regulator, with banks contributing 15 per cent, while customers will absorb a 15 per cent hit. The RBI said it will formulate a detailed framework for customer compensation. 

The move comes against the backdrop of a rising number of digital fraud cases, with customers increasingly losing hard-earned savings to such incidents. 

“We have a Deposit Education and Awareness (DEA) Fund, where adequate surplus has accrued over a period of time. We may use that fund (for compensation),” said Swaminathan J, deputy governor, RBI.

 

Swaminathan J added that more than two-thirds of fraud cases are of small value, though they account for about 15 per cent of total fraud value. 

According to RBI data, card and internet frauds accounted for 66.8 per cent of total fraud cases in 2024-25. Nearly 13,500 cases of card and internet fraud were reported during the year, involving ₹520 crore. In 2023-24, more than 29,000 such cases were reported, amounting to ₹1,457 crore, while in 2022-23, nearly 6,700 cases involving ₹277 crore were recorded. 

Separately, the central bank has proposed issuing comprehensive instructions to regulated entities on advertising, marketing and sales of financial products and services to curb mis-selling. 

“Mis-selling of financial products and services by any regulated entity has significant consequences for both customers and the entity concerned. There is a felt need to ensure that third-party products and services sold at bank counters are suitable to customer needs and commensurate with the risk appetite of individual clients,” the RBI said. 

The proposed framework will emphasise product suitability, customer appropriateness and informed consent, which will form the pillars of the detailed guidelines, said Shirish Chandra Murmu, Deputy Governor, RBI. 

Malhotra clarified that mis-selling is not widespread across the system. “On a systemic level, such instances of mis-selling are not very rampant. However, for us, every instance matters. Hence, we have taken everything into consideration, and we will come out with guidelines so that these instances can be controlled,” he said. 

Banks distribute a range of financial products, including insurance policies, mutual funds and other instruments. In recent times, instances have emerged where products were sold to customers for whom they were not suitable. 

“The proposed fraud framework, focused on improving customer centricity and grievance redress across the banking system, will enhance customer trust and service quality,” said Binod Kumar, managing director and chief executive officer, Indian Bank. 

In addition, the RBI said it will review and harmonise existing conduct-related instructions on the engagement of recovery agents and other aspects of loan recovery. Draft instructions will be issued shortly for public consultation. 

At present, different sets of instructions apply to different categories of regulated entities with regard to the engagement of recovery agents and conduct-related aspects of loan recovery.