RBI's New Fraud Compensation Mechanism: What's Different, Who Pays, How to Claim

The Reserve Bank of India (RBI) has notified a revised mechanism to compensate victims of digital payment fraud. Under the new framework, a bona fide victim who loses money in a fraudulent electronic banking transaction (EBT) of up to Rs 50,000 can recover a major part of the amount. The rules were notified in the fourth week of June 2026 and will take effect from 1 January 2027. The aim is to limit the customer's liability and make the system more pro-consumer.

The headline number is this: a genuine victim can get compensation of up to 85% of the net loss, subject to a cap of Rs 25,000, and this benefit is available once in a lifetime. So for a fraud loss below Rs 29,412, the victim gets 85% of the amount back. For a loss between Rs 29,412 and Rs 50,000, the victim receives the flat cap of Rs 25,000. To claim, the victim must report the fraud to the bank within five calendar days, and the bank must then prove that the fraud did not happen due to its own lapse. The customer should also report the fraud on the National Cyber Crime Reporting Portal or the helpline number 1930.

A key feature is who bears the cost. For a typical domestic fraud below Rs 29,412, of the 85% compensation, the RBI pays 65%, the victim's own bank pays 10%, and the bank where the stolen money landed (the beneficiary bank) pays 10%. For losses between Rs 29,412 and Rs 50,000, the RBI contributes Rs 19,118 (about 76.5%) of the Rs 25,000, while the victim's bank and beneficiary bank pay about Rs 2,941 (around 12%) each. In cross-border fraud cases, the victim's bank's share is higher. Importantly, if the fraud happened because of the bank's own negligence - such as failing to send alerts for transactions above Rs 500, not providing 24x7 complaint channels, or system failures - the bank must compensate the victim fully.

The framework also sets time limits. Banks must resolve domestic fraud complaints within 45 calendar days and cross-border ones within 60 days. For credit card frauds, the bank must give a "shadow reversal" (a temporary credit the customer cannot yet use, but which stops interest and charges piling up) within five days. This matters in the Indian context because digital payment fraud has been rising sharply - in FY26, even as reported fraud cases more than halved to 10,114, the total amount involved rose 46% to about Rs 48,021 crore.

For aspirants, remember the core facts: compensation of up to 85% of net loss capped at Rs 25,000, once in a lifetime, for frauds up to Rs 50,000; report within five days; effective 1 January 2027; the RBI itself bears the largest share of the payout (a new feature); and full compensation if the bank was negligent. Also remember the helpline 1930 and the National Cyber Crime Reporting Portal.