RBI caps compensation for digital fraud victims at ₹25,000 under new norms

Victims of small-value digital banking frauds involving losses of up to ₹50,000 in fraudulent electronic banking transactions will be eligible for compensation of up to ₹25,000, subject to certain conditions, according to the Reserve Bank of India’s (RBI’s) finalised compensation framework released on Wednesday.

 

However, the central bank has deferred the implementation of the framework by six months, from July 1, 2026, to January 1, 2027. The directions will apply to electronic banking transactions undertaken on or after that date.Meanwhile, no compensation is mentioned for frauds exceeding ₹50,000.

 

Under the framework, a victim, including an individual or sole proprietor, will receive compensation equivalent to 85 per cent of the net loss amount, or ₹25,000, whichever is lower. The benefit can be availed only once in a lifetime.

   

To qualify, customers must report the fraud both to their bank and to the National Cyber Crime Reporting Portal or Helpline 1930 within five calendar days of the occurrence of the fraudulent transaction.

 

According to the RBI, the revised framework broadens customer protection against fraudulent electronic banking transactions and clearly defines the responsibilities of banks in handling complaints, reversing unauthorised transactions, and compensating eligible victims.

 

For fraud cases involving losses below ₹29,412, customers will be compensated 85 per cent of the net loss. Of this, the RBI will bear 65 per cent, while the customer's bank and the beneficiary bank will contribute 10 per cent each.

 

For losses of ₹29,412 or more, up to ₹50,000, where compensation is capped at ₹25,000, the RBI will contribute ₹19,118, while the customer’s bank and the beneficiary bank will contribute ₹2,941 each. In cross-border fraudulent transactions, the RBI will contribute ₹19,118 and the customer's bank ₹5,882.

 

“The burden of proving customer liability in complaints involving fraudulent EBTs shall lie on the bank," the RBI said.

 

Customers will continue to enjoy zero liability where the fraud results from negligence or deficiency on the part of the bank, irrespective of whether the transaction was reported. Zero liability will also apply in cases involving third-party breaches, provided the unauthorised transaction is reported within five calendar days of its occurrence.

 

The amended directions define bank negligence to include failure to implement mandated security systems, non-issuance of transaction alerts, absence of 24x7 reporting channels, failure to act diligently on customer complaints, system malfunctions, security breaches, and internal frauds leading to unauthorised transactions.

 

Banks will be required to provide round-the-clock channels for reporting fraudulent transactions and the loss of debit or credit cards. They must also send instant SMS alerts for all electronic banking transactions exceeding ₹500 and email alerts wherever customers have registered email addresses.

 

The RBI has also prescribed timelines for complaint resolution. Banks must examine complaints, determine liability, and issue a response within 45 calendar days in domestic fraud cases and 60 calendar days in cross-border cases.

 

In a customer-friendly measure, banks will be required to provide a "shadow reversal" equivalent to the disputed amount in cases involving fraudulent credit card transactions within five calendar days of receiving notification from the customer. During this period, customers will not incur any additional interest or charges.

 

The compensation mechanism will be available for losses arising from fraudulent electronic banking transactions occurring within one year of the directions coming into effect.