The Reserve Bank of India has proposed a compensation framework to protect consumers from losses arising out of unauthorised or unintended digital transactions, offering up to ₹25,000 for eligible victims. The move comes as digital payments via UPI, debit and credit cards, and internet banking grow rapidly across India amid a rising incidence of cyber-enabled fraud.
Scope of the proposed framework
Under the proposal, customers who suffer small-value cyber frauds could receive compensation of up to ₹25,000 or 85% of the loss, whichever is lower. The relief is intended primarily for genuine victims who did not act with malicious intent.
The RBI recognises that many modern scams rely on social engineering—fraudsters coerce or trick users into sharing OTPs, authentication codes or authorising transactions. The draft framework would consider compensation even where a customer unwittingly shared credentials or approved a payment under deception, provided the action was not deliberate.
Why focus on small-value frauds
Data from banks and regulators show most reported digital frauds in India involve amounts typically below ₹50,000. Individually modest losses can still inflict material hardship on middle-class households, students, pensioners and first-time digital users.
By targeting these small but widespread incidents, the RBI aims to reduce financial distress for vulnerable users and reinforce public trust in digital payments, encouraging wider adoption while mitigating perceived risks.
Funding and eligibility mechanics
The compensation pool is expected to be financed through institutional arrangements that may include contributions from the Depositor Education and Awareness Fund, alongside shared responsibility by banks. Under certain conditions, customers might be required to bear a small portion of the loss.
To prevent abuse, the draft proposes a one-time compensation entitlement per customer and time-bound reporting requirements. Customers will need to report suspected fraud within a specified window to qualify for relief.
Broader regulatory intent
The compensation proposal forms part of the RBI’s wider efforts to strengthen consumer protection and resilience in digital banking. Complementary measures under consideration include enhanced authentication standards, delayed settlement or hold mechanisms for suspicious transactions and targeted safeguards for senior citizens.
As digital payments become integral to everyday finance in India, regulators face the dual task of fostering innovation while ensuring accountability. This proposal signals a shift toward more explicit consumer redress mechanisms within the country’s digital payments architecture.
Implications for users
- The framework could provide a safety net for customers who fall victim to social-engineering scams, lowering the barrier to digital adoption for hesitant users.
- Final eligibility criteria, funding sources and procedural timelines will be set out in the RBI’s formal guidelines; retail users should watch for those details and follow prescribed reporting channels.
