RBI Proposes ₹25,000 Compensation for Small Digital Frauds

The Reserve Bank of India (RBI) has proposed a new compensation mechanism aimed at providing relief to bank customers who lose money in small-value digital fraud cases.

Under draft guidelines released by the central bank, victims of digital fraud involving losses of up to ₹50,000 could receive compensation of up to ₹25,000 as a one-time measure.

Compensation Even in Some Negligence Cases

According to the draft proposal, compensation may be provided even if the fraud occurred partly due to customer negligence, provided the incident is reported within five days.

The RBI said banks would be required to compensate genuine victims within five days of receiving a complaint.

The compensation would be shared between the central bank and the banks involved, with the RBI bearing the majority of the payout.

Reason Behind the Proposal

The move comes amid a growing number of digital payment frauds across the country. According to the RBI, a significant portion of these incidents involve small-value transactions, though their total financial impact remains notable.

RBI Governor Sanjay Malhotra had earlier stated that the proposed compensation would be provided as a one-time measure without extensive questioning, provided the complaint is genuine.

New Rules May Start From July 2026

The proposed guidelines are expected to come into effect from July 1, 2026, if approved.

The central bank has invited feedback from banks, industry stakeholders and the public before April 6.

Stronger Safeguards for Digital Transactions

As part of the draft rules, banks would also be required to send instant SMS alerts for all electronic transactions above ₹500.

The RBI said the updated framework expands the scope of earlier guidelines introduced in 2017 to better address newer forms of digital payment fraud.

Conditions for Compensation

To qualify for compensation, customers must report the fraudulent transaction through official channels such as the National Cyber Crime Reporting Portal or the cybercrime helpline 1930, and inform their bank within the specified time limit.

The compensation mechanism is proposed to remain in force for one year initially, after which the RBI will review its effectiveness.

Zero Liability in Certain Cases

The draft rules also clarify that customers will have zero liability if fraud occurs due to negligence or security lapses on the part of the bank.

Banks will also need to maintain a reporting system to regularly review digital fraud complaints and strengthen their security procedures.

The RBI said the new framework aims to improve consumer protection while strengthening trust in India’s expanding digital payments ecosystem.