Amid rising cases of online banking fraud, the Reserve Bank of India has proposed a significant relief for customers. Under the new draft rules, customers can receive partial compensation for frauds up to ₹50,000, even if the customer is negligent.
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Amid the rapidly increasing number of online banking fraud cases in the country, the Reserve Bank of India (RBI) is preparing to take new steps to provide relief to customers. The central bank has issued a draft rule, according to which a customer suffering a loss of up to ₹50,000 due to electronic banking fraud can receive partial compensation. Interestingly, in some cases, relief can be provided even if the customer was negligent. According to the proposal, in such cases, the customer can be compensated up to 85 percent of the loss or a maximum of ₹25,000 (whichever is less).
Customer Responsibility for Bank or Third Party Failure
According to the RBI proposal, if the fraud is due to the bank’s negligence or a third-party security breach, the customer will not be held responsible. In such cases, the customer can receive a full refund and the relevant transaction can be reversed. The central bank has also clarified that in such situations, the responsibility of proving the customer’s fault will be on the bank. This means that the bank will have to prove that the customer was negligent in the fraud.
When will the new rules be implemented?
According to the RBI draft, these rules could be implemented on electronic banking transactions starting July 1, 2026. The central bank has sought suggestions and comments from stakeholders on this proposal by April 6, 2026.
According to RBI data, approximately 65 percent of banking frauds in the country involve amounts less than ₹50,000. Therefore, this new framework has been designed to provide relief to customers in small but common fraud cases.
What to do to receive compensation?
If a customer experiences online banking fraud, they must file two complaints within five days. The first complaint must be filed with their bank and the second with the National Cyber Crime Helpline 1930. The bank must then investigate the matter within 30 days of receiving the complaint, respond to the customer, and determine who is responsible.
Proposed Compensation Distribution Formula
The RBI has also proposed a specific compensation distribution formula in this draft. If the loss is less than ₹29,412, the customer will receive 85 percent compensation. The RBI will contribute 65 percent of this amount, while the customer’s bank and the bank where the money was lost will each contribute 10 percent.
If the loss is between ₹29,412 and ₹50,000, the RBI will contribute ₹19,118, while the customer’s bank and the beneficiary bank will each contribute ₹2,941.
Rules to be reviewed after one year
The central bank has stated that this compensation system will be effective for one year from the date of implementation. It will be reviewed after that. The plan in the future is to gradually increase the banks’ share and reduce or eliminate the RBI’s contribution.
What is considered negligence by the bank and the customer?
The RBI has also clarified the definition of negligence in this draft. Failure to implement necessary security systems, send transaction alerts, provide an easy way to report fraud, or respond to complaints promptly will be considered negligence by the bank.
Regarding a customer sharing information such as a PIN, password, or OTP with someone or delaying reporting fraud, this will be considered negligence by the customer.
Relief for customers in the age of digital banking
Amidst the rapidly increasing use of digital payments and online banking, this proposal is being considered a relief for millions of customers. If implemented, these rules could significantly help protect customers from financial losses in cases of minor cyber fraud.
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