RBI’s new fraud compensation mechanism

The Reserve Bank of India (RBI) has notified a revised compensation mechanism for victims of fraudulent electronic banking transactions (EBTs), aimed at strengthening consumer protection in the digital payments ecosystem. The new framework was announced on 24 June 2026 and will come into effect from 1 January 2027.

Key Features of the New Framework

Under the revised mechanism:

• Victims of digital payment fraud involving losses of up to ₹50,000 can receive compensation of up to 85% of the net loss amount, subject to a maximum of ₹25,000.
• The compensation benefit can be availed once during a customer’s lifetime.
• For losses below ₹29,412, victims will receive compensation equal to 85% of the amount lost.

Eligibility Conditions

A customer will be eligible for compensation only if:

• The fraudulent transaction is reported within five calendar days of occurrence.
• The complaint is found to be genuine and validated according to the bank’s internal investigation procedures.
• The transaction qualifies as a fraudulent electronic banking transaction under RBI guidelines.

Compensation Structure 

• If a customer loses ₹20,000 due to a fraudulent digital transaction: Compensation payable = 85% of ₹20,000 = ₹17,000.
• For losses exceeding ₹29,412: Compensation will be capped at ₹25,000.

Who Bears the Cost?

For domestic fraudulent EBTs involving compensation:

Contributor	Share of Compensation
RBI	65%
Victim’s Bank	10%
Receiving Bank (where funds were fraudulently transferred)	10%
Customer’s Uncompensated Share	Remaining portion

For cross-border fraudulent EBTs: 

• RBI continues to bear 65%.
• Victim’s bank contribution increases to 20%.
• The remaining burden is allocated as per the framework.

Bank Liability in Cases of Negligence

The RBI has clarified that banks must provide full compensation where fraud results from the bank’s negligence. Examples of negligence include:

• Failure to maintain adequate security safeguards.
• Failure to send mandatory transaction alerts for EBTs exceeding ₹500.
• Failure to provide 24×7 complaint registration facilities.
• System malfunctions and technical failures.
• Security breaches.
• Delayed or inadequate response to customer complaints.

In such situations, customers are entitled to complete reimbursement irrespective of the compensation limits.

Time Limits for Complaint Resolution

Banks are required to resolve complaints within:

Type of Fraud	Resolution Period
Domestic Fraudulent EBTs	45 calendar days
Cross-border Fraudulent EBTs	60 calendar days

Source: IE

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