RBI Proposes ₹25,000 Compensation Framework For Small-Value Digital Fraud Victims

The Reserve Bank of India on February 6 said it will introduce a framework to compensate customers for losses of up to ₹25,000 arising from small-value digital frauds, as part of a broader set of measures aimed at strengthening customer protection and payment security, according to the central bank’s monetary policy statement.

RBI Governor Sanjay Malhotra announced the proposal while presenting the February Monetary Policy Committee decision, stating that the compensation framework will cover losses incurred in fraudulent electronic transactions. The RBI said the proposal will be implemented through draft guidelines that are expected to be released shortly.

The central bank noted that while small-value frauds account for a relatively lower share of total monetary losses, they form a large proportion of fraud cases by volume. The RBI says that about 65% of reported cases of digital fraud involve transactions of less than ₹55,000. This shows how important it is to have targeted consumer protection measures. 

The proposed compensation framework forms part of a wider regulatory push to enhance trust and safety in India’s rapidly expanding digital payments ecosystem. The RBI said it will issue draft guidelines covering mis-selling of third-party financial products, recovery practices by lenders, and the limitation of customer liability in cases of unauthorised electronic banking transactions.

In addition, the RBI said it will publish a discussion paper outlining measures to strengthen digital payment security. These measures are expected to include mechanisms such as delayed crediting of funds in specific scenarios and enhanced authentication requirements for select categories of users, including senior citizens, according to the central bank.

The RBI said the guidelines are intended to ensure that financial products sold through bank channels are appropriate to customer needs and aligned with individual risk profiles. The central bank added that the proposed framework will reassess existing safeguards governing customer responsibility in cases of digital fraud.

The RBI pointed out that the amount of digital payments has gone up sharply over the past ten years, along with fraud techniques that are getting more and more complex. This shows how big the problem is. According to RBI data, banks reported 13,469 cases of fraud involving cards and the internet in FY25, which cost them ₹520 crore. This compares with 29,080 cases and losses of ₹1,457 crore reported in the previous financial year.

The RBI said the proposed compensation and regulatory measures are aimed at improving confidence in digital transactions while ensuring stronger safeguards for consumers as electronic payments continue to expand across the financial system.