RBI's new rule: Digital fraud victims to get up to 85% compensation from 2027

The Reserve Bank of India (RBI) has introduced a revised compensation mechanism for victims of digital payment fraud, effective from January 1, 2027. Under the new rules, customers who lose money due to fraudulent electronic banking transactions can recover up to 85% of their loss, subject to a cap of Rs 25,000, provided they report the fraud within five days.

The move comes amid rising concerns over digital fraud. According to RBI data for fiscal year 2025-26, reported fraud cases fell to 10,114, but the total amount involved increased by 46% to Rs 48,021 crore, highlighting the growing financial impact of such crimes.

Key changes in the framework include a clear distinction between losses for which the bank is liable and those where the customer is a victim without bank negligence. If the fraud arises due to the customer's bank's negligence—such as failure to provide security systems, send mandatory alerts for transactions above Rs 500, or offer 24x7 complaint channels—the bank must compensate the customer fully.

For other cases where the customer is a bona fide victim and has lodged a complaint within five calendar days, compensation is determined as follows: For net loss up to Rs 29,412, the victim receives 85% of the amount. For losses between Rs 29,412 and Rs 50,000, the compensation is capped at Rs 25,000. In both scenarios, the RBI bears the largest share—65% and 76.5% respectively—while the victim's bank and the beneficiary bank contribute the remainder. In cross-border frauds, the victim's bank takes on a higher share.

The compensation is available only once during a customer's lifetime. If the stolen amount is partially recovered, the compensation is calculated on the net loss after recovery. For example, if a fraud involves Rs 40,000 and Rs 15,000 is recovered, the net loss is Rs 25,000, and compensation is Rs 21,250 (85% of Rs 25,000), with the RBI contributing Rs 16,250 and the banks Rs 2,500 each.

To claim compensation, victims must file a complaint with their bank within five days of noticing the fraud. The bank must resolve domestic complaints within 45 calendar days and cross-border complaints within 60 days. The new framework aims to reduce the financial burden on customers while encouraging prompt reporting and accountability from banks.