The Reserve Bank of India (RBI) has introduced new directions aimed at improving customer protection against small-value digital banking frauds. Effective from January 1, 2027, and applicable for one year, the framework shifts the burden of proving customer liability in fraudulent electronic banking transfer (EBT) complaints to banks. Individual customers, including sole proprietors, who suffer fraudulent EBT losses of up to ₹50,000 and file genuine complaints will be eligible for compensation of 85% of their net loss or ₹25,000, whichever is lower, once in their lifetime. The directions also define how compensation will be shared between the RBI, the customer’s bank, and the beneficiary bank, while allowing customers to recover amounts beyond ₹25,000 if additional funds are later recovered.
Compensation Eligibility
Particulars
Details
Effective date
January 1, 2027
Validity
One year
Eligible victims
Individual customers, including sole proprietors
Maximum fraud amount covered
₹50,000
Compensation
85% of net loss or ₹25,000, whichever is lower
Lifetime benefit
Once per customer
Burden of proving liability
Banks
Compensation Sharing: Loss Below ₹29,412 (85% Compensation)
Domestic Fraud
Share
RBI
65%
Customer’s bank
10%
Beneficiary bank
10%
Cross-Border Fraud
Share
RBI
65%
Customer’s bank
20%
Compensation Sharing: Loss Between ₹29,412 and ₹50,000 (₹25,000 Compensation)
Domestic Fraud
Amount
RBI
₹19,118
Customer’s bank
₹2,941
Beneficiary bank
₹2,941
Cross-Border Fraud
Amount
RBI
₹19,118
Customer’s bank
₹5,882
Can Customers Recover More Than ₹25,000?
Scenario
Outcome
Additional recovery after compensation
Yes. Customers can receive more than ₹25,000 if further recoveries are made by banks.
Maximum guaranteed compensation
₹25,000 (subject to eligibility)
Recovery above compensation
Any additional recovered amount is distributed as per RBI’s recovery-sharing mechanism.
Example 1: ₹40,000 Domestic Fraud with ₹15,000 Recovered Before Compensation
Particulars
Amount
Gross loss
₹40,000
Recovery before compensation
₹15,000
Net loss
₹25,000
Compensation payable (85%)
₹21,250
RBI contribution
₹16,250
Customer’s bank contribution
₹2,500
Beneficiary bank contribution
₹2,500
Example 2: ₹40,000 Domestic Fraud with Full Recovery
Particulars
Amount
Compensation paid
₹25,000
RBI contribution
₹19,118
Customer’s bank contribution
₹2,941
Beneficiary bank contribution
₹2,941
Total recovery
₹40,000
Recovery Distribution
Recipient
Amount
Customer
₹15,000
RBI
₹19,118
Customer’s bank
₹2,941
Beneficiary bank
₹2,941
Example 3: ₹40,000 Domestic Fraud with ₹15,000 Recovered After Compensation
Particulars
Amount
Compensation paid
₹25,000
Recovery after compensation
₹15,000
Net loss
₹25,000
Compensation due (85%)
₹21,250
Additional amount payable to customer
₹11,250
Recovery Distribution
Recipient
Amount
Customer
₹11,250
RBI
₹2,868
Customer’s bank
₹441
Beneficiary bank
₹441
Cases Not Covered
Criteria
Provision
Fraud amount above ₹50,000
Not covered under the new compensation framework
Resolution mechanism
Existing operating procedures will continue to apply
