RBI's new digital fraud compensation mechanism: What's different, who pays, how to claim

📌 Summary:

• RBI notified a revised, strongly pro-consumer compensation mechanism for digital payment fraud, effective January 1, 2027
• Victims of fraudulent electronic banking transactions (EBTs) involving up to Rs 50,000 can recover a major portion of losses — 85% of net loss or Rs 25,000, whichever is less, once in a lifetime
• For losses below Rs 29,412, the customer gets 85%; complaint must be lodged within 5 calendar days and loss established per the bank's internal policy
• Cost-sharing (domestic EBT, loss < Rs 29,412): RBI bears 65%, victim's bank 10%, beneficiary bank 10%; for cross-border, victim's bank's share rises
• For losses Rs 29,412-50,000 (compensation Rs 25,000): RBI pays Rs 19,118 (76.5%), victim's and beneficiary banks ~12% each
• Banks must fully compensate where fraud arose from bank negligence (no safety mechanisms, no alerts above Rs 500, no 24x7 complaint channel, system malfunction, breach, or non-diligence)
• Resolution timelines: 45 days (domestic), 60 days (cross-border)
• Context: in FY26 reported fraud cases more than halved to 10,114 but the amount involved rose 46% to Rs 48,021 crore

🎯 UPSC Relevance: GS3 — cyber/digital financial fraud, consumer protection in banking, RBI's regulatory role; intersection of internal security (cyber) and economy

📝 Prelims Facts:

• New mechanism effective January 1, 2027
• Max compensation: 85% of net loss or Rs 25,000 (whichever less), once per lifetime
• Complaint window: 5 calendar days; resolution: 45 days domestic / 60 days cross-border
• FY26: 10,114 fraud cases; amount Rs 48,021 crore (up 46%)

🔑 Key Term: Electronic Banking Transaction (EBT) — a digital/electronic payment or fund transfer; the new RBI framework limits customer liability for fraudulent EBTs.