RBI to Compensate Cyber Fraud Victims Up to ₹25,000
The Reserve Bank of India (RBI) has announced a new framework to compensate victims of small-value digital fraud, offering up to ₹25,000 per incident. This initiative aims to bolster customer trust in the digital payment ecosystem, even covering cases where customers inadvertently share OTPs, provided it's a first-time, unintended incident. Draft guidelines on this and other customer protection measures are expected soon.
Key Highlights
- RBI to offer up to ₹25,000 compensation for digital fraud victims.
- Compensation covers cases with shared OTPs if unintentional and first-time.
- A customer can claim this benefit only once in a lifetime.
- Customer to bear 15% of the fraud amount; banks also share responsibility.
- The framework aims to enhance trust in India's digital payment systems.
- Draft guidelines for implementation will be released shortly.
The Reserve Bank of India (RBI) is set to introduce a significant customer protection measure, offering compensation of up to ₹25,000 to victims of small-value digital frauds. This initiative, announced by RBI Governor Sanjay Malhotra on February 6, 2026, aims to bolster confidence in India's rapidly growing digital payment ecosystem. A key aspect of this new framework is that it will cover fraudulent transactions even if the customer inadvertently shares their One-Time Password (OTP) with fraudsters, provided the incident is a first-time occurrence and there is no malicious intent. This 'no questions asked' approach, within defined parameters, is designed to provide relief to a large segment of affected individuals.
Under the proposed framework, the compensation will be capped at ₹25,000 or 85% of the total loss, whichever is lower. However, customers will be required to bear 15% of the fraud amount, ensuring they have some 'skin in the game,' a principle also extended to the banks. This shared responsibility model seeks to balance victim relief with accountability. The compensation is a one-time benefit, available only once in a lifetime per customer, to encourage vigilance and prevent repeated errors.
The RBI's move comes in response to the rising incidence of digital frauds in India. Official data indicates that while small-value frauds constitute a large proportion of cases by volume (approximately 65% involve transactions under ₹55,000), they often cause significant financial distress to individuals. In the fiscal year 2024-25, banks reported 13,469 cases of card and internet-based frauds amounting to ₹520 crore, a decrease from the previous year's figures. The funds for this compensation will be drawn from the Depositor Education and Awareness (DEA) Fund, which holds unclaimed deposits of over 10 years, thus minimizing the direct financial burden on banks for this specific initiative.
Beyond compensation, the RBI is concurrently strengthening the digital payment landscape through other measures. Draft guidelines are slated for release on mis-selling of financial products, loan recovery practices, and limiting customer liability in unauthorized electronic transactions. Furthermore, a discussion paper on enhancing digital payment safety is expected, potentially introducing features like lagged credits and additional authentication for vulnerable user groups, such as senior citizens. These comprehensive steps underscore the RBI's commitment to creating a safer and more trustworthy digital financial environment for all Indian citizens. The original article from The Economic Times accurately reflects these announcements, with the published date being February 6, 2026.
Frequently Asked Questions
What is the maximum compensation for digital fraud victims in India?
The Reserve Bank of India (RBI) proposes to compensate victims of small-value digital fraud up to ₹25,000 per incident.
Does the compensation cover cases where I shared my OTP?
Yes, the compensation framework will cover cases where a customer inadvertently shares their One-Time Password (OTP), provided it's a first-time, unintentional incident and no malafide intent is found.
Can I claim this compensation multiple times?
No, the compensation benefit is a one-time relief and can be claimed only once in a lifetime per customer.
Who will bear the cost of the compensation?
The compensation will be funded from the Depositor Education and Awareness (DEA) Fund. Additionally, customers will bear 15% of the fraud amount, and banks will also share a portion of the responsibility.