The goal of the proposed change is to expand the current guidelines on limiting customers’ liability in unapproved electronic banking transactions to include other types of fraudulent electronic banking activities. Draft Amendment Directions for “Review of Framework of Limiting Customer Liability in Digital Transactions” have been released by the Reserve Bank of India (RBI). Customers who report frauds up to Rs 50,000 as soon as possible could receive up to 85% of the loss or Rs 25,000, whichever is less, under the proposed framework.
The proposed revision aims to reduce the time banks take to process complaints about fraudulent electronic banking transactions, introduce a compensation mechanism for small value fraudulent electronic banking transactions, and expand the scope of current instructions on limiting liability of customers in unauthorized electronic banking transactions to include other categories of fraudulent electronic banking transactions.
Since the current guidelines on reducing clients’ responsibility in unlawful electronic banking transactions were issued in 2017, the digital payment and banking landscape has undergone significant change. After assessment, it has been decided to give banks updated instructions.
After these Amendment Directions take effect, the proposed compensation mechanism will be in place for a year. “This will be reviewed on the basis of the experience gained with an objective of enhancing the share of the banks and reducing / eliminating the share of RBI in the compensation paid to the victims,” the central bank stated.
Regulated entities, members of the public, and other stakeholders may provide comments or criticism on the proposed Amendment Directions via email and the RBI website by April 6, 2026, at the latest.
Sanjay Malhotra, the governor of the Reserve Bank of India, announced a number of initiatives to strengthen urban cooperative banks (UCBs), promote ease of doing business for NBFCs, deepen financial markets, improve customer protection, advance financial inclusion, and improve credit flow during the most recent monetary policy meeting in early February.
A structure to reimburse consumers for damages resulting from small-value fraudulent transactions up to Rs 25,000 was suggested, among other things. The governor had stated in the monetary policy statement that the RBI would also release a discussion paper on possible ways to improve the security of online payments.
FAQ: RBI’s Proposed Faster Compensation for Fraudulent Digital Transactions
1. What is the purpose of RBI’s proposed amendment?
The Reserve Bank of India (RBI) aims to expand guidelines on limiting customer liability in unauthorized electronic banking transactions to include other types of fraudulent digital activities. The goal is to reduce complaint resolution time and introduce a compensation mechanism for small-value fraudulent transactions.
2. What is the proposed compensation for victims?
Customers reporting frauds up to Rs 50,000 promptly could receive up to 85% of the loss or Rs 25,000, whichever is less, under the proposed framework.
3. How long will the compensation mechanism be in place?
The mechanism is proposed for one year initially. RBI will review its effectiveness and may adjust the share borne by banks vs. RBI based on the experience gained.
4. Who can provide feedback on the proposed directions?
Regulated entities, members of the public, and other stakeholders can submit comments or suggestions via email or the RBI website by April 6, 2026.
5. Why is RBI updating these guidelines now?
The current guidelines date back to 2017, and the digital payments landscape has significantly evolved since then. The update ensures better protection for customers and addresses new forms of fraudulent digital transactions.
6. What other initiatives has RBI announced recently?
During the February 2026 monetary policy meeting, RBI Governor Sanjay Malhotra announced measures to:
Strengthen urban cooperative banks (UCBs)
Improve ease of doing business for NBFCs
Deepen financial markets
Advance financial inclusion
Enhance credit flow
Improve customer protection and online payment security
7. How does this affect small-value fraudulent transactions?
For frauds up to Rs 25,000, a structured reimbursement mechanism will be in place, making it easier and faster for victims to receive compensation.
