RBI’s Digital Fraud Compensation Rules: Victims To Get Up To ₹25,000

The Reserve Bank of India (RBI) has issued directives to limit the liabilities of customers in cases of unauthorised electronic banking transactions or digital fraud.

Customers losing up to ₹50,000 due to unauthorised digital transactions will now be eligible for compensation of up to 85% of the net loss amount or ₹25,000, whichever is lesser, once in their lifetime. 

The compensation will be funded jointly by the RBI, which will foot 65% of the bill, while the customer’s bank will provide 10% of the compensation. The beneficiary bank, in which the fraudsters first receive the funds, will provide 10% compensation. In case of multiple beneficiary banks, compensation will be provided by them in proportion to the funds received. 

For fraudulent cross-border transactions where the beneficiary bank is not located in India, the RBI will provide 65% of the compensation and the customer’s bank will provide the remaining. 

If the proceeds from a fraudulent transaction are recovered after compensation has already been paid out, the banks will be required to calculate the remaining compensation by deducting the already paid out sum. 

For unauthorised credit card payments, the banks will need to provide a shadow reversal equivalent to the deducted amount to the customer’s card within five days of receiving the customer’s complaint. This provision was not part of the draft guidelines issued earlier in the year. 

The RBI has placed the burden of proof of customer liability on the banks, which will also be liable to reverse transactions in cases of third-party breaches or negligence. 

The new directives are set to come into force from January 1, 2027. To receive compensation, the victim must report the fraudulent transfer on the National Cyber Crime Reporting Portal or National Cyber Crime Helpline and to the bank within five calendar days from its occurrence. For this, the RBI has mandated banks to provide round-the-clock support to customers to ensure timely registration of complaints. 

Further, the final directives have broadened the scope of the small value fraudulent transactions framework from just ‘individual persons’ to also include ‘sole-proprietors’, bringing relief to small businesses owners that were excluded from the draft guidelines issued in March. 

The final framework also mandates banks to send instant SMS alerts for all electronic banking transactions above ₹500, down significantly from the earlier threshold of ₹5,000. The customer can’t be charged for these alerts, the RBI said. 

The amendments are part of regulators’ increasing scrutiny on user protection, fraud management and grievance redressal. The RBI has, over the past few years, rolled out multiple measures around payment security, digital lending oversight and customer safeguards as transaction volumes on formal digital rails have climbed. 

In May 2026, UPI transactions stood at a record 23.2 Bn. These transactions were worth ₹29.9 Lakh Cr. In FY26, 241.62 Bn UPI transactions took place worth ₹314 Lakh Cr, up 30% YoY in terms of volume and 20.6% in terms of value. 

At the same time, 7.1% of attempted digital consumer transactions in India were suspected fraud in 2025, nearly double the global average of 3.8%. Due to this, over $1.7 Bn (about ₹14,000 Cr) is lost annually to cybercrime and UPI scams, according to a recent TransUnion report.

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