Banks have asked the Reserve Bank of India (RBI) to set up a centralised, industry-level mechanism for fraud reporting and claim settlement before RBI fraud compensation for small-value electronic banking frauds begins in January 2027. Lenders want clarity on customer eligibility, reporting timelines, beneficiary-bank liability and recoveries, according to a report in The Economic Times on 13 November 2026.
The request comes as the regulator prepares to roll out a framework that will pay eligible victims up to ₹25,000. The move builds on the broader RBI framework that gives UPI fraud victims a path to zero liability.
What the RBI fraud compensation framework offers
Under RBI’s instructions titled ‘Limiting Liability of Customers in Unauthorised Electronic Banking Transactions’, an individual acting in good faith who lodges a complaint on a gross loss of up to ₹50,000 will receive 85 per cent of the net loss or ₹25,000, whichever is lower. The benefit is available only once in a person’s lifetime. The detailed provisions are set out in RBI’s directions for commercial banks on limiting customer liability.
The payout is computed after deducting recoveries from the gross loss. The cost is shared as follows:
- Domestic fraudulent electronic banking transactions: RBI bears 65 per cent, the customer’s bank 10 per cent and the beneficiary bank 10 per cent.
- Cross-border fraudulent transactions: RBI bears 65 per cent and the customer’s bank 20 per cent.
- The remaining 15 per cent of the net loss is not compensated and stays with the customer.
Why are banks seeking a centralised mechanism?
Bank executives, who spoke without being named, said implementation at the level of individual banks could be difficult and that a standardised industry framework is needed. One executive said some suggestions from internal discussions among banks have already been shared with RBI.
Another executive said banks support compensation but that it will need closer coordination among lenders, the regulator and investigating agencies. The executive pointed to ongoing discussions on mule accounts, saying all stakeholders must be aligned on such cases before any compensation is paid. The concern echoes the debate on bank liability for digital arrest fraud victims, where the question of who pays has moved to the centre.
RBI’s wider push on digital payment safeguards
In April 2026, RBI released a discussion paper, ‘Exploring Safeguards in Digital Payments to Curb Frauds’, which listed four options:
- Lagged credit for authorised push payments other than low-value transactions.
- Additional authentication by a trusted person for high-value digital transactions by vulnerable sections of society.
- Large credits only to accounts that have passed a satisfactory additional review.
- Customer-induced controls on payments.
The measures sit alongside industry efforts such as anti-scam partnerships that banks are forming as AI-driven fraud rises. RBI has also tightened controls elsewhere, including API safeguards for bank-NBFC fund transfers.
Key takeaways
- Banks want an industry-level system for fraud reporting and claim settlement before RBI’s compensation framework starts in January 2027.
- Eligible victims with a gross loss of up to ₹50,000 can receive 85 per cent of the net loss or ₹25,000, whichever is lower, once in a lifetime.
- RBI bears 65 per cent of the payout, with the customer’s bank and, for domestic cases, the beneficiary bank sharing the rest.
FAQ
Who is eligible for RBI fraud compensation?
An individual acting in good faith who lodges a complaint on a gross loss of up to ₹50,000 from fraudulent electronic banking transactions is eligible, once in a lifetime.
How much compensation can a fraud victim get?
The victim gets 85 per cent of the net loss after recoveries, or ₹25,000, whichever is lower.
When does the framework take effect?
It applies from January 2027.
Featured image: Reserve Bank of India headquarters, Mumbai. Photo: DesiBoy101 via Wikimedia Commons (CC BY 4.0)
