A new rule on compensation in cases of electronic fraud in banking from January 1, 2027, has been introduced by the Reserve Bank of India regarding electronic modes of payment through commercial banks. Full compensation is provided in cases where the fault is that of the bank itself or that of a third party, reporting in time being important. Lifetime compensation is also possible up to ₹25,000 or 85% of the loss incurred.
Imagine yourself receiving an SMS on your mobile phone regarding the deduction of ₹15,000 from your bank account without your permission. Till now, recovering funds in case of being a victim of any online scam has not been an easy task. Moreover, banks have not been helpful in such cases. To ensure better security of their customers in case of digital scams, the RBI has come up with the new compensation policy.
Which transactions are covered?
The new rule will apply to all commercial banks. However, it will not cover small finance banks, payment banks, regional rural banks, or local area banks. It includes almost every digital payment method used today, such as UPI, net banking, mobile banking, and debit or credit card payments, whether made by swiping, tapping, or entering card details online.
When will customers get a refund?
The RBI has said that banks cannot simply blame the customer whenever an online fraud takes place. If a bank claims that the customer was negligent, it will have to prove it. The new rule explains three different situations in which compensation will be decided.
If the bank is responsible: If the fraud happens because of a security lapse, a technical glitch, or the bank fails to send a transaction alert, the customer will receive a full refund. This will apply whether the customer reports the fraud immediately or later.
If a third party is responsible: Customers will also get a full refund if the fraud is caused by a payment app, payment gateway, or telecom service provider. However, the incident must be reported to the bank within five calendar days. If the complaint is made after that, the bank will decide the case according to its internal policy.
If the customer makes a mistake: The RBI has also provided relief in cases where customers accidentally click on a phishing link or share their OTP. If the loss is not very high and the customer reports the fraud quickly, compensation may still be available under this rule.
Who can claim compensation?
The following are some of the guidelines that the RBI has provided for the scheme.
One of the major guidelines for this scheme is that a person can avail themselves of the benefit only once in a lifetime. The person cannot become the victim of online fraud again in the future and still be entitled to compensation under this scheme.
The maximum compensation under this scheme will be ₹25,000 or 85% of the total loss suffered by the victim, whichever is lower. For example, if a person loses ₹50,000 due to an online fraud, 85% of the sum is equal to ₹42,500. However, since there is a limit of ₹25,000 on the compensation, the customer will get only ₹25,000.
How can consumers enjoy the advantage?
If there is a fraud without any responsibility on the part of the consumer, then it must be reported within five days. Complaints are to be made either through the National Cyber Crime Reporting Portal, cyber crime toll free number 1930, or through the concerned bank itself. Upon receiving the complaint, the bank will take prompt action to stop any misuse of the account of the consumer.
How will the compensation be shared?
The compensation will be shared among different organizations. Out of the 85% compensation payable to the customer, the RBI will bear 65%, while the customer’s bank will contribute 10% and the beneficiary bank, where the fraudulently transferred money was credited, will bear the remaining 10%. If any part of the stolen money is recovered later, the compensation will be calculated only after deducting the recovered amount.
The above compensation rule will not be applied to the cases where the amount lost exceeds ₹50,000. For such cases, recovery shall be effected according to the old operating procedures.
