RBI plans to compensate up to ₹25,000 in online fraud losses

The Reserve Bank of India (RBI) has proposed to introduce a framework to compensate victims of online frauds up to ₹25,000 for losses incurred in small-value fraudulent transactions.

The draft guidelines will be issued soon. Both the victim and the bank will have skin in the game and both will bear 15% of the transaction value. The RBI will pay the remaining from its Depositor Education and Awareness Fund. 

Also read: ₹1.40 per ₹1 lakh lost to fraud as India’s digital payments surge, says RBI

For example, if someone has lost ₹50,000 in a fraudulent transaction, 85% of that amount (₹42,500) or ₹25,000, whichever is less, will be paid by the RBI. 

In case someone lost ₹20,000, 85% of that amount (₹17,000) or ₹25,000 which ever is lower, will be paid. In this case the victim gets ₹17,000.

For such small-value fraudulent transactions, which constitute 65% of online frauds, no questions will be asked of the victim if she/he has even given an OTP. 

“We will have a framework for compensation for small frauds. We have observed that while in value, they constitute a small proportion, in terms of numbers, 65% of them have less than ₹50,000 in terms of amount [lost in fraudulent transactions],” RBI Governor Sanjay Malhotra said.

“So as long as they are defrauded, whether on their own accord or anyone’s accord, no questions will be asked. An amount of ₹25,000 or 85% of the amount. You will have the details very shortly. We will compensate them as long as it is unintended and that they have lost,” the Governor said.

“If he loses the money, no questions asked. We will make checks so it is not kind of mala fide. That is why we have kept the amount very small,” he said. 

Unclaimed deposits

The RBI has a Deposit Education and Awareness Fund which also includes unclaimed deposits amounting to ₹85,000 crore. It has an adequate income surplus that has accrued over a period of time and the central bank plans to make use of that.

Explaining further, Deputy Governor Swaminathan J said: “Essentially more than two-thirds in number are small-value frauds, but in value they constitute less than 10%. So it is that particular segment who are unwittingly becoming victims of such frauds that we are trying to cover.”

“So financial impacts will not be very high, but a large number of customers may be provided some service [relief], that is the intention which we are trying to do,” he added. 

The RBI has also announced the publication of a discussion paper on possible measures to enhance the safety of digital payments. Such measures may include lagged credits (to the fraudsters’ accounts) and additional authentication for specific classes of users, like senior citizens, who are more vulnerable to online fraud.

To curb mis-selling financial products and services by banks, which has significant consequences for both customers as well as the Regulated Entities (REs), the RBI will soon issue draft instructions for public consultation. 

“There is a felt need to ensure that third-party products and services that are being sold at the bank counters are suitable to customer needs and are commensurate with the risk appetite of individual clients. It has therefore been decided to issue comprehensive instructions to REs on advertising, marketing and sales of financial products and services,” Mr. Malhotra said.

With recovery agents deploying coercive measures in violation of existing guidelines, the RBI has decided to review and harmonise all the extant conduct-related instructions on the engagement of recovery agents and other aspects related to the recovery of loans. 

Accordingly, the draft instructions in this regard shall be issued shortly for public consultation.

Currently, different sets of instructions are applicable to different categories of REs with respect to the engagement of recovery agents and conduct related aspects of loan recovery. 

For the advancement of financial inclusion and the flow of credit, the RBI has proposed to increase the limit of ₹10 lakh for collateral-free loans to MSMEs to ₹20 lakh.

To further promote financing to the real estate sector, it has proposed to allow banks to lend to REITs with certain prudential safeguards.

Published – February 06, 2026 10:17 pm IST