The Reserve Bank of India (RBI) has proposed compensating customers up to Rs 25,000 for losses from small-value fraudulent transactions, even if they shared a one-time password (OTP). Close to 65 per cent of frauds involve amounts less than Rs 50,000. The benefit will be available only once in a lifetime.
The Reserve Bank of India (RBI) has announced new initiatives to protect customers victimized by digital fraud. The central bank proposes compensating up to Rs 25,000 per case for losses from small-value fraudulent transactions. RBI Governor Sanjay Malhotra stated, “It is proposed to introduce a framework to compensate customers up to Rs 25,000 for loss incurred in small-value fraudulent transactions.” He added, “As long as they are defrauded, whether on their own accord or anyone’s accord, no questions asked, and Rs 25,000 or 85 per cent (of the loss amount)…we will compensate them as long as it is unintended and they lost that money.”
RBI Deputy Governor Swaminathan J explained that payouts will come from the Deposit Education and Awareness Fund, which includes unclaimed deposits. He noted that the RBI will cover 70 per cent of the loss, with the remaining 30 per cent shared between the customer and the bank. Sources show a minor inconsistency in the compensation percentage, mentioning 85 per cent in one instance.
The benefit is available only once in a lifetime, and customers who shared OTPs remain eligible. The RBI will issue a paper for public consultation on this. Additionally, as part of customer-centric measures, the RBI will release three separate draft guidelines: one addressing mis-selling of financial products to ensure transparency and accountability; another on loan recovery practices, including recovery agents' conduct to prevent harassment; and a third limiting customer liability in unauthorised electronic banking transactions.
The central bank will also release a discussion paper on enhancing digital payment security, potentially including lagged credits—where funds are credited after a brief delay for verification—and additional authentication for vulnerable users like senior citizens. These steps aim to build trust in the financial system and promote safer banking practices.
Close to 65 per cent of frauds involve amounts under Rs 50,000, highlighting the need for such protections.
