RBI Caps Fraud Compensation at Rs 25,000 for Digital Payment Victims

The Reserve Bank of India (RBI) on Wednesday introduced a new compensation framework for victims of digital payment fraud, limiting customer liability and widening safeguards. The revised rules, outlined in the RBI (Commercial Banks – Responsible Business Conduct) Third Amendment Directions, 2026, aim to protect bona fide victims of fraudulent electronic banking transactions (EBT).

Under the new mechanism, a customer who reports a fraudulent EBT involving a gross loss of up to Rs 50,000 will receive compensation equal to 85% of the net loss amount, capped at Rs 25,000. This compensation is available only once in the customer's lifetime. To qualify, the victim must report the fraud on the National Cyber Crime Reporting Portal or via the National Cyber Crime Helpline (1930) and to their bank within five calendar days of the transaction.

For credit card fraud, the RBI has mandated that banks provide a 'shadow reversal' of the disputed amount within five calendar days from the date the customer notifies the bank. This interim credit will be provided while the bank investigates the complaint. The shadow reversal ensures that the customer's account is not debited during the probe period.

The central bank clarified that these rules apply to all commercial banks and are designed to reduce the financial burden on customers who fall victim to digital fraud. The RBI emphasized that customers must act promptly to report fraudulent transactions to avail of the compensation. The guidelines also require banks to streamline their complaint-handling processes and ensure transparency in resolving fraud-related disputes.

This move comes amid a rise in digital payment frauds in India, as the adoption of online transactions grows. The RBI's revised framework seeks to strike a balance between encouraging digital payments and protecting consumers from financial losses due to cyber fraud.