RBI to compensate bank customers up to ₹25,000 for digital frauds

In a significant move to protect banking customers from rising digital frauds, the Reserve Bank of India (RBI) announced on Thursday that victims of fraudulent transactions will be eligible for compensation of up to ₹25,000.

RBI Governor Sanjay Malhotra said the compensation would be paid even if the customer had shared their one-time password (OTP) with fraudsters, provided there is no malafide intent. The payout will come from the ₹85,000-crore Depositor Education and Awareness (DEA) Fund , but the compensation will be available only once in a lifetime per customer . Malhotra noted that while the total value of digital frauds is relatively low, about two-thirds of cases involve amounts under ₹50,000 . “As long as the transaction is unintended and the customer has lost money, ₹25,000 will be paid, no questions asked,” he said. Customers will bear 15% of the fraud amount even if it is under the ₹25,000 limit, to ensure they have “skin in the game.”

Under the scheme, customers will first need to report any unauthorized transactions or digital fraud incidents to their bank. The bank will then verify the details of the complaint, including transaction history and intent, while excluding cases involving malafide actions by the customer. Once verified, the bank will submit the claim to the DEA Fund, which will calculate the compensation. For small-value frauds under ₹25,000, full compensation will be provided, with the customer bearing 15% of the loss. In high-value frauds, the compensation will be capped at ₹25,000 per customer and paid only once in a lifetime. After approval, the bank will credit the amount to the customer’s account. The RBI will release a draft of the compensation framework for public consultation before finalizing the process.

Malhotra also announced that additional safety measures will be introduced, such as enhanced authentication and delayed credit to beneficiary accounts, particularly to protect senior citizens from fraud. Deputy Governors Swaminathan J and Shirish Murmu added that most victims of small-value frauds stand to benefit from the scheme, and awareness campaigns encouraging depositors to reclaim unclaimed deposits have helped increase the run rate of deposits to around ₹5,000 crore per year.