The Reserve Bank of India has issued draft guidelines aimed at protecting bank customers from digital payment fraud, introducing a compensation framework for victims of small-value frauds. The proposal comes as digital payments like UPI, cards, and mobile banking continue to grow rapidly in India.
Key Proposal: Compensation for Digital Fraud Losses
Under the draft rules:
- Customers may receive up to 85% of the amount lost, capped at ₹25,000 per case.
- The compensation mainly applies to small-value digital fraud cases, typically involving transactions up to ₹50,000.
- The benefit is expected to be a one-time relief for customers affected by such fraud.
The goal is to provide quicker financial relief to victims while investigations continue.
Transactions Covered
The proposed framework will cover frauds in common digital banking channels, including:
- UPI payments
- Internet banking
- Mobile banking
- Debit and credit card transactions
- ATM withdrawals
These are the most common channels through which customers experience digital fraud today.
Responsibility Sharing
The proposed framework introduces a shared liability model:
- RBI: expected to cover a major portion of the compensation through a central fund.
- Banks: may bear a smaller share of the loss.
- Customers: may still bear a small portion of the loss to encourage vigilance.
This structure aims to balance consumer protection with responsible digital banking practices.
Reporting Deadline Matters
To qualify for compensation:
- Customers must report the fraud quickly — often within a few days of noticing the transaction.
- Banks may need to credit compensation within a defined time frame once the complaint is verified.
Prompt reporting will remain a key requirement under the proposed framework.
When Will These Rules Apply?
- The guidelines are currently in draft stage.
- RBI has invited feedback from stakeholders before finalising them.
- If approved, the rules are expected to take effect around July 1, 2026.
Why RBI Is Introducing This Framework
Digital fraud cases have been increasing alongside the rise in online transactions. Many scams involve relatively small amounts but large numbers of victims, which is why the central bank is focusing on quick compensation for such cases.
The new framework aims to:
- Increase trust in digital payments
- Provide faster relief to victims
- Improve consumer protection in the digital banking ecosystem