RBI Proposes Compensation Up To ₹25,000 For Victims Of Small Digital Frauds

The Reserve Bank of India has proposed a compensation framework for small-value digital banking frauds to strengthen customer protection and boost trust in online payments.

With digital payments rapidly increasing across the country, the Reserve Bank of India (RBI) has proposed a new framework that may allow bank customers to receive compensation of up to ₹25,000 in cases of small-value digital frauds.

The move comes as the use of online transactions and platforms such as UPI, card payments and internet banking continues to grow sharply in India. While these services have made payments easier and faster, they have also led to a rise in cyber fraud cases affecting many users.

Compensation For Small Fraud Transactions

Under the proposed framework, customers who lose money due to small-value digital frauds may receive compensation of up to ₹25,000.

The proposal is aimed particularly at protecting vulnerable users, many of whom fall victim to scams where fraudsters trick people into sharing sensitive information such as OTPs, PINs or passwords.

The RBI has said that the initiative is meant to strengthen trust in the digital payment ecosystem and encourage safer use of online banking services.

Broader Definition Of Digital Fraud

The draft guidelines also expand the definition of fraudulent electronic transactions.

Fraud will include situations where a third party carries out transactions using credentials obtained from customers through fraudulent means, or when customers are misled into sending money to scammers posing as legitimate recipients.

Authentication through OTP, PIN, CVV, passwords or other electronic verification methods will also fall within the scope of authorised electronic banking transactions under the revised rules.

Liability Rules For Customers And Banks

The framework proposes clear rules regarding responsibility in case of fraud.

Customers will have zero liability in situations where the fraud occurs due to negligence or security failures on the part of the bank.

Zero liability will also apply if the fraudulent transaction involves a third-party breach and the customer reports the incident within five calendar days.

The burden of proving customer liability in such cases will lie with the bank, according to the proposed guidelines.

Alerts And Complaint Resolution

Banks will also be required to strengthen safety measures for digital transactions.

Under the proposal, banks must send instant SMS alerts for all electronic banking transactions above ₹500 and provide 24×7 channels for customers to report fraud or loss of payment instruments.

Banks will be required to resolve complaints and determine liability within 30 days of receiving the complaint.

One-Year Pilot Scheme

The compensation mechanism is proposed as a one-year pilot initiative.

After the pilot period, the framework will be reviewed based on experience and feedback to determine whether changes are needed, including adjustments to the share of compensation paid by banks and the industry fund.

The RBI said the initiative aims to create a stronger safety net for digital users while encouraging banks to improve fraud monitoring systems and prevention measures.