Victims of digital transaction fraud can breathe easy. Under the Reserve Bank of India’s revised compensation mechanism, victims of digital payment fraud involving amounts up to Rs 50,000 can recover a major portion of the money lost to fraud.
Notified by the central bank on Wednesday, and effective January 1, 2027, the new system is another measure to limit customer liability and safeguard customers in such situations.
The new framework, under which the RBI has offered to compensate a substantial portion, comes at a time when bank frauds, especially digital transaction frauds, have become a growing concern for the RBI. In FY26, while the reported fraud cases more than halved to 10,114, the amount involved rose 46% to Rs 48,021 crore.
What has changed?
The central bank has attempted to make the new compensation guidelines strongly pro-consumer. The RBI will contribute the major part of the compensation under the new framework.
Under the new mechanism, victims are eligible for compensation of up to 85% of their losses, up to Rs 25,000, thereby reducing the hit they take from such frauds. A bona fide victim who lodged a complaint involving gross loss of an amount up to Rs 50,000 on account of a fraudulent electronic banking transaction (EBT) will be compensated 85% of the net loss amount or Rs 25,000, whichever is less, once during the lifetime, the RBI’s new framework reads.
For a complaint involving a loss of less than Rs 29,412 via fraudulent EBT, the customer will receive 85% of the amount as compensation. Victims are eligible for such compensation only if they lodge a complaint regarding the fraud within five calendar days. The loss must also be established in accordance with the internal processes set out in the victim’s bank’s policy.
Who pays the compensation?
The central bank states that the victim’s bank must compensate the victim entirely for any fraud arising from the bank’s negligence. Negligence in this case includes failing to ensure proper safety and security mechanisms for EBTs, failing to send mandatory alerts for EBTs above Rs 500, failing to provide 24×7 channels for customer complaints, system malfunctions, security breaches, and failing to act diligently on customer complaints.
The framework specifies that banks must resolve customer complaints regarding fraudulent EBTs within 45 calendar days for domestic fraudulent EBTs, and within 60 days for cross-border fraudulent EBTs.
In the case of a fraud of less than Rs 29,412, where the customer is to be paid 85% of the amount lost in compensation, 65% of the cost will be borne by the RBI, 10% by the victim’s bank, and the remaining 10% by the bank where the fraudulent amount ends up in case of domestic fraudulent EBTs. In case of cross-border fraudulent EBTs, the victim’s bank’s contribution will rise to 20%.
For fraud complaints involving amounts between Rs 29,412 and Rs 50,000, where the victim will be compensated Rs 25,000, the RBI will contribute Rs 19,118 (76.5%), while the victim’s bank and the beneficiary bank will contribute Rs 2,941 each (around 12%) in case of domestic EBT frauds. In case of cross-border cases, the victim’s bank will contribute Rs 5,882 towards the compensation.
“In cases where there is more than one beneficiary bank, the applicable compensation to be borne by each bank shall be in the proportion of the amount credited to their respective account(s),” the framework clarified.
Thus, if the amount lost under fraud is Rs 40,000, and the amount recovered from the fraud is Rs 15,000, the victim would be eligible for compensation of Rs 21,250 (85%), with the RBI contributing Rs 16,250 and the victim’s and the beneficiary banks contributing Rs 2,500 each. In case none of the lost amount is recovered, the victim will be paid compensation of Rs 25,000, with the involved parties contributing in the proportion stated above.
How can victims claim compensation?
Once the fraudulent amount has been deducted, victims should report the fraud to both their bank in question and to the National Cyber Crime Reporting Portal or the National Cyber Crime Helpline. “On receipt of a complaint regarding any fraudulent EBT from a customer, a bank shall take prompt steps to prevent further unauthorised EBTs in the customer’s account(s) under advice to him/her. Further, the bank shall also advise the customer to lodge a complaint on National Cyber Crime Reporting Portal or National Cyber Crime Helpline (1930) at the earliest,” the central bank’s new framework said.
The customer needs to report the fraud to the bank within 5 calendar days of the fraud happening to be eligible for compensation. After lodging the complaint, it is the bank’s responsibility to prove the fraud did not occur due to a lapse at their end.
While the fraud investigation will take time, with resolution within 45 days in most cases), the victim’s bank has to ensure that the fraudulent amount to be reversed to the customer in case of recovery is valued to the original date of recovery so that the victim does not suffer any loss of interest or bear any additional charges.
In the case of fraudulent EBTs on credit cards, the victim’s bank has to provide a “shadow reversal” equivalent to the victim within 5 calendar days of the complaint. “While the customer shall not be allowed to use such amount, he/she will not bear any additional burden of interest/ charges,” RBI said.
The central bank has attempted to make the new compensation guidelines strongly pro-consumer. (Express Photo - Tashi Tobgyal) 
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