Amid rising digital fraud and mounting customer complaints across the banking system, the Reserve Bank of India (RBI) has announced a significant step to protect bank users. The central bank said it will introduce a new framework to compensate victims of small-value online frauds up to ₹25,000, a move aimed at strengthening trust in digital payments and offering faster relief to affected customers.
RBI Governor Sanjay Malhotra, speaking to the media after the monetary policy announcement, said most digital fraud cases are small in value but large in number and impact. According to the RBI’s assessment, nearly 65% of digital fraud cases involve amounts below ₹55,000, prompting the regulator to design a targeted compensation mechanism for such incidents.
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Digital fraud data raises concern
RBI data shows that in FY2024–25, banks reported 13,469 fraud cases related to card and internet-based transactions, involving losses of ₹520 crore. In comparison, the previous financial year saw 29,080 cases with losses of ₹1,457 crore. While the overall value of losses has declined, the persistence of a high number of small-ticket frauds remains a key concern for regulators.
The governor noted that as digital payments expand rapidly, fraud methods are becoming more sophisticated, leaving ordinary customers increasingly vulnerable.
Three draft guidelines proposed
To strengthen customer protection, the RBI announced that it will issue three draft guidelines focusing on the following areas:
Mis-selling of financial products: Banks will be required to ensure that third-party products and services sold at their counters are suitable for customers’ needs and risk profiles.
Loan recovery and recovery agents: Stricter norms will be laid down to ensure transparency and dignity in recovery practices, an area that has seen frequent borrower complaints.
Customer liability in unauthorised digital transactions: A revised framework will limit customer responsibility in cases of electronic banking fraud.
The RBI said these measures are intended to enhance accountability among banks and financial institutions while offering stronger safeguards to customers.
Discussion paper on payment security
The central bank will also release a discussion paper on improving digital payment safety.
Proposals under consideration include:
- Lagged credits, allowing time to flag and stop suspicious transactions
- Additional authentication, especially for vulnerable user groups such as senior citizens
According to the RBI, such steps could significantly reduce the risk and impact of digital fraud.
The bigger picture
Analysts say the proposal to compensate up to ₹25,000 will come as major relief to millions of customers who often face lengthy complaint processes and uncertainty after small digital frauds. At the same time, tighter rules on mis-selling and recovery practices are expected to bring greater transparency and responsibility to banking operations.
Overall, the RBI’s latest moves underline a clear regulatory message: in an increasingly digital banking ecosystem, customer protection has moved to the centre of policy priorities. The true test will come in the months ahead, when the draft guidelines and discussion paper are finalised and implemented on the ground.
About the author – Ayesha Aayat is a law student and contributor covering cybercrime, online frauds, and digital safety concerns. Her writing aims to raise awareness about evolving cyber threats and legal responses.
