3 min readMumbaiFeb 7, 2026 08:02 AM IST
First published on: Feb 7, 2026 at 05:30 AM IST
The Reserve Bank of India (RBI) has proposed to compensate up to Rs 25,000 per case for losses arising from small-value fraudulent transactions.
Close to 65 per cent of frauds involve amounts less than Rs 50,000, and customers will be eligible to get pay-outs in fraud cases even if they have shared a one-time password (OTP).
“It is proposed to introduce a framework to compensate customers up to Rs 25,000 for loss incurred in small-value fraudulent transactions,” RBI Governor Sanjay Malhotra said. “As long as they are defrauded, whether on their own accord or anyone’s accord, no questions asked, and Rs 25,000 or 85 per cent (of the loss amount)…we will compensate them as long as it is unintended and they lost that money,” he said.
Benefit only once in lifetime
A customer will be able to avail this benefit once in a lifetime for the loss of money due to such frauds. Further, they can avail of the compensation even where they have shared a one-time password. The RBI will issue a paper on this for public consultation, the Governor said.
According to him, a customer will also be eligible to get a pay-out in fraud cases, Malhotra said the RBI will compensate 70 per cent of the loss amount and the balance 30 per cent would be shared between the customer and the bank.
RBI Deputy Governor Swaminathan J said the pay-out will be made from surplus income accrued on the Deposit Education and Awareness Fund. “We have a Deposit Education and Awareness Fund, which also includes unclaimed deposits. So, we have adequate income surplus (on the fund) that has accrued over a period of time. We may use that,” he said.
Mis-selling, loan recovery procedures, customer liability in focus
As part of customer-centric measures, the RBI Friday announced that it will issue three separate draft guidelines for public consultation. The first will address mis-selling of financial products, seeking to ensure greater transparency and accountability on the part of banks and financial institutions. The second set will focus on loan recovery practices, including the conduct and engagement of recovery agents, to prevent harassment and unfair treatment of borrowers. The third will deal with limiting customer liability in cases of unauthorised electronic banking transactions, the RBI said.
In addition, the central bank will release a discussion paper outlining possible steps to enhance the safety and security of digital payments. These measures could include mechanisms such as lagged credits—where funds are credited after a brief delay to allow verification—and additional authentication requirements for certain categories of users, including senior citizens, who may be more vulnerable to digital fraud.
Together, these initiatives by the RBI are expected to bolster trust in the financial system and ensure safer, more responsible banking practices.
A customer will be able to avail this benefit once in a lifetime for the loss of money due to such frauds. 
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