Victims of certain digital banking frauds will receive greater financial protection under a new compensation framework introduced by the Reserve Bank of India (RBI). Effective from January 1, 2027, the new rules aim to make it easier for customers to recover a portion of their losses while placing greater responsibility on banks to strengthen fraud detection and resolution systems.
Under the new framework, eligible customers who suffer losses of up to ₹50,000 in fraudulent electronic banking transactions—including phishing scams, fake KYC frauds, and unauthorized UPI or internet banking transactions—can receive compensation of up to ₹25,000, subject to specific conditions. The scheme will remain in force for one year from its implementation date.
The compensation will not be a fixed ₹25,000. Instead, customers will receive 85% of their net financial loss, after deducting any amount already recovered, or ₹25,000, whichever is lower. For instance, if a customer loses ₹20,000 and ₹5,000 is later recovered, the net loss becomes ₹15,000, making the eligible compensation ₹12,750. If the net loss exceeds the maximum limit, the payout will be capped at ₹25,000.
The benefit will be available only once during a customer’s lifetime and applies exclusively to genuine individual customers, including sole proprietors, whose total fraudulent transaction amount does not exceed ₹50,000. Cases involving higher losses will continue to be handled under the existing dispute resolution process.
One of the most significant changes under the new framework is that the responsibility of proving customer negligence or liability will now rest with the bank, offering stronger protection to victims during investigations.
Compensation will be paid directly by the customer’s bank after verifying the claim and calculating the eligible amount. The RBI has also introduced a cost-sharing mechanism under which both the central bank and participating banks will bear the financial burden of compensation, depending on the value and nature of the fraudulent transaction.
Additionally, if more money is recovered from fraudsters after compensation has already been paid, customers may receive further reimbursement as per the RBI’s prescribed recovery formula.
The new framework is expected to provide faster financial relief to victims of digital banking fraud while encouraging banks to improve security measures and strengthen customer protection against cybercrime.
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