RBI’s New Fraud Compensation Mechanism

About RBI’s New Fraud Compensation Mechanism

• RBI’s New Fraud Compensation Mechanism is a revised framework that provides compensation to eligible victims of fraudulent electronic banking transactions involving losses up to ₹50,000.
  • The new framework builds on the RBI’s Limited Liability Framework (2017, updated), which established that customers would have zero or limited liability if they reported unauthorized electronic banking transactions promptly.
• Common Types of Digital Fraud: SIM swapping, phishing, vishing (voice call fraud), OTP theft, fake UPI handles, QR code scams, and AI-driven deepfake frauds are common forms of digital payment fraud.
• Effective from: The revised framework will apply to electronic banking transactions undertaken on or after January 1, 2027.
• Aim: The framework aims to limit customer liability, strengthen customer protection, and improve banks’ responsibility for fraud prevention and grievance redressal.
• Key Features:
  • Compensation: A bona fide victim can receive 85% of the net loss or ₹25,000, whichever is lower, once during the lifetime for eligible fraud cases.
  • Eligibility: The customer must report the fraud to both the bank and the National Cyber Crime Reporting Portal or Helpline 1930 within five calendar days.
  • Zero Liability: Customers will have zero liability if the fraud results from bank negligence or a third-party breach reported within five days.
  • Burden of Proof: Banks must establish customer negligence before rejecting any compensation claim.
  • Bank Obligations: Banks must provide 24×7 complaint channels, instant SMS alerts for transactions above ₹500, email alerts where available, and direct complaint links on websites and mobile applications.
  • Complaint Resolution: Banks must resolve complaints within 45 days for domestic frauds and 60 days for cross-border frauds.