RBI to compensate digital fraud victims up to ₹25,000 for first loss
Mumbai, Feb 6, 2026
RBI has announced a one-time compensation of up to Rs 25,000 for victims of small-value digital frauds, while also moving to tighten norms on mis-selling and loan recovery practices
In a first-of-its-kind initiative, bank customers who are victims of small-value digital frauds will be compensated up to Rs 25,000, only for the first time, the Reserve Bank of India announced on Friday.
How much compensation will digital fraud victims receive?
The proposed compensation will be a one-time relief and will cover up to 85 per cent of the amount lost or Rs 25,000, whichever is less, RBI Governor Sanjay Malhotra said during an interaction with the media after the monetary policy announcement.
“… as long as (the customers) are defrauded, whether on their own accord or anyone else’s accord, no questions asked, we will compensate them as long as it is unintended,” Malhotra said.
Who will bear the cost of compensation?
A large part of the compensation will be borne by the regulator, with banks contributing 15 per cent, while customers will bear a 15 per cent hit. A detailed framework for customer compensation will be formulated by the regulator.
Why has RBI introduced this compensation framework?
The move comes amid a rising number of cases of customers falling victim to digital frauds and losing their hard-earned money.
“We have a Deposit Education and Awareness Fund, where adequate surplus has accrued over a period of time. We may use that fund (for compensation),” said Swaminathan J, deputy governor, RBI. He added that more than two-thirds of frauds are small-value frauds, but in value terms they constitute about 15 per cent of total frauds.
What do RBI data show on digital fraud trends?
According to RBI data, during 2024–25, the share of card and internet frauds in total frauds stood at 66.8 per cent in terms of the number of cases. Nearly 13,500 cases of card and internet frauds were reported in 2024–25, involving Rs 520 crore. In 2023–24, over 29,000 such cases were reported, amounting to Rs 1,457 crore, while in 2022–23, nearly 6,700 cases were reported involving Rs 277 crore.
What steps is RBI taking to curb mis-selling?
Separately, the RBI has proposed issuing comprehensive instructions to regulated entities on advertising, marketing and sales of financial products and services to curb mis-selling.
“Mis-selling of financial products and services by any regulated entity has significant consequences for both customers and the entity. There is a felt need to ensure that third-party products and services sold at bank counters are suitable to customer needs and commensurate with the risk appetite of individual clients,” the RBI said.
What will the new mis-selling guidelines focus on?
The emphasis will be on product suitability, customer appropriateness and consent, which will form the pillars of the RBI’s detailed guidelines, explained Shirish Chandra Murmu, deputy governor, RBI.
Malhotra said mis-selling is not rampant across the system. “On a systemic level, such instances of mis-selling are not very rampant. However, for us, every instance matters. Hence, we will come out with guidelines so that these instances can be controlled,” he said.
Banks distribute multiple financial products, including insurance policies, mutual funds and other instruments. In recent years, there have been instances where products were sold to customers for whom they were not suitable.
How will the new fraud framework help customers?
“The proposed fraud framework, focused on improving customer centricity and grievance redressal across the banking system, will enhance customer trust and service quality,” said Binod Kumar, managing director and chief executive officer of Indian Bank.
What changes are planned for loan recovery practices?
The RBI also said it will review and harmonise existing conduct-related instructions on the engagement of recovery agents and other aspects of loan recovery. Draft instructions will be issued shortly for public consultation.
Currently, different sets of instructions apply to different categories of regulated entities with respect to the engagement of recovery agents and conduct-related aspects of loan recovery.
[The Business Standard]
