The Reserve Bank of India (RBI) yesterday released draft guidelines for a compensation scheme to protect consumers from digital fraud.

Under the proposed regime, aggrieved customers will be reimbursed up to 85% of their lost amount or ₹25,000, whichever is lower. The compensation can be claimed only once in a customer’s lifetime.

The draft rules also shift the burden of proving customer liability to banks. This means banks will have to show that the customer was responsible in cases involving fraudulent electronic transactions. The directions will apply to transactions carried out on or after July 1, 2026.

The draft norms have also capped the maximum loss amount, for which reimbursement can be claimed, at ₹50,000. Citing its rationale for the threshold, the RBI noted that nearly 65% of digital banking fraud cases involved amounts below ₹50,000.

“A bona fide victim, being an individual person and having lodged a complaint involving gross loss of an amount up to ₹50,000 on account of fraudulent electronic banking transaction(s)… shall be compensated 85% of the net loss amount…, or ₹25,000, whichever is less, once during his / her lifetime…,” read the circular.

Under the new regime, customers will have zero liability if the fraud happens due to a bank’s negligence or because of a third-party breach. In such cases, the transaction will be reversed.

However, compensation will be given only if the bank confirms the loss as genuine and the victim reports the fraud to both the bank and the National Cyber Crime Helpline (1930) within five days.

Banks will also have to examine complaints, determine liability and respond to customers within 30 days of receiving a complaint.

The framework also introduces a loss-sharing model between banks and the RBI. For total loss amount below ₹29,412, the RBI will contribute 65%, while the customer’s bank and the beneficiary bank will contribute 10% each to the 85% compensation pool.

For losses between ₹29,412 and ₹50,000, involving a total compensation amount of ₹25,000, the RBI’s share will remain ₹19,118 (76.4%), while the customer’s bank and the beneficiary bank will together contribute ₹2,941 (11.8%) each.

The draft will remain in force for one year after it comes into effect, after which the RBI will review it. The central bank said that the goal is to gradually increase the share of losses borne by banks and reduce its own contribution.

The draft also clarifies what counts as authorised and unauthorised electronic transactions. Authorised transactions include those carried out using passwords, PINs or OTPs, including cases where customers are tricked or pressured into transferring money to scammers.

Meanwhile, the RBI also defines bank negligence as failing to put in place proper security systems, not sending transaction alerts or not acting quickly on fraud complaints. On the other hand, customer negligence may include sharing login details such as PINs, passwords or OTPs, delaying the reporting of fraud or downloading malicious applications.

The RBI has invited feedback from stakeholders on the draft guidelines till April 6, 2026.

The move comes as the RBI steps up efforts to tackle rising online frauds. Data security and transaction fraud have become a key concern for the regulator as more people rely on online banking and digital payment platforms for everyday transactions.

To address this, the central bank has also been building new technology systems. For instance, it is developing an AI-powered platform to flag risky online transactions and warn users before they proceed with payments that may be linked to fraud.

The post RBI Proposes ₹25K Cap On Compensation For Online Frauds appeared first on Inc42 Media.