With online banking frauds rising across India, the Reserve Bank of India has proposed a compensation framework to partly reimburse victims of small-value digital frauds.
Under draft guidelines released on Friday, individuals who lose money through fraudulent electronic banking transactions could receive up to 85 percent of the loss, capped at ₹25,000, provided the total amount lost does not exceed ₹50,000.
The move is aimed at strengthening consumer protection in India’s rapidly expanding digital payments ecosystem, where fraud through phishing links, fake customer-care calls and unauthorised transactions has been increasing.
According to the RBI draft proposal:
Customers who suffer digital fraud losses of up to ₹50,000 can claim compensation.
Victims will be reimbursed 85 percent of the net loss or ₹25,000, whichever is lower.
The compensation benefit can be availed only once during a customer’s lifetime.
The framework will apply to electronic banking transactions carried out on or after July 1, 2026, if the proposal is finalised.
To qualify for compensation, victims must report the fraud quickly.
Customers must report the incident:
On the National Cyber Crime Reporting Portal or via the cyber crime helpline 1930, and
To their bank within five calendar days of the occurrence.
In the case of joint accounts, any one of the account holders can submit the claim. However, once compensation is claimed as a joint account holder, that individual will not be eligible to claim again later as a single account holder.
The RBI has also proposed a mechanism to adjust compensation if funds are recovered later.
If the bank retrieves part of the stolen amount after paying compensation, the reimbursement will be recalculated based on the customer’s actual loss. If excess compensation had been paid earlier, the bank may adjust it against the recovered amount before crediting the balance to the customer.
Banks will have to compensate customers within five calendar days of receiving a valid application. After making the payment, banks can seek reimbursement of the applicable amount from the RBI on a quarterly basis.
The regulator has also asked banks to strengthen internal oversight. Bank boards or designated committees will periodically review:
fraudulent electronic banking transactions reported by customers
action taken on such complaints
the functioning of grievance redressal systems
improvements needed in fraud monitoring and prevention.
The draft guidelines also clarify responsibility once a fraud is reported.
Any unauthorised transaction occurring after a customer reports the fraudulent electronic banking transaction will be borne by the bank. In cases where a third-party breach is reported after the five-day window, compensation may still be considered in eligible cases. Otherwise, the customer’s liability will be determined according to the bank’s policy.
The proposed compensation mechanism will initially remain in force for one year from the effective date of the guidelines. The RBI said the framework will be reviewed based on experience, with the objective of increasing the share borne by banks and reducing or eliminating the RBI’s share in compensation paid to victims.
The RBI has invited public feedback on the draft guidelines until April 6 before finalising the scheme.
