RBI's digital fraud compensation rules 2026: How will bank customers get ₹25,000 or more? Explained

The Reserve Bank of India's latest directions on responsible business conduct by banks are set to help victims of small-value digital banking frauds involving losses of up to ₹50,000.

Effective from 1 January 2027 for a year, the directions put the burden of proving customer liability in complaints involving fraudulent electronic banking transfers (EBTs) on banks.

Moreover, victims of fraudulent EBTs during the one-year period from January 1, 2027, will be eligible for a compensation of up to ₹25,000 if the value of the fraudulent transaction is not more than ₹50,000.

"A bona fide victim, being an individual person, including a sole proprietor, and having lodged a complaint involving gross loss of an amount up to ₹50,000 on account of fraudulent EBT(s)... shall be compensated 85 per cent of the net loss amount (calculated after reducing recoveries made, whether before or after paying the compensation, from the gross loss amount), or ₹25,000, whichever is less, once during her / his lifetime...," the RBI's directions say.

But who will pay the compensation: the bank or the RBI, and how will it be paid to customers? This article answers these questions based on the rules and examples cited in the directions.

How will the compensation be paid?

As per the RBI directions, the compensation will be paid to victims as follows:

In this case, the compensation will be distributed as follows:

• 65% by RBI

• 10% by the customer's bank

• 10% by the beneficiary bank in case of domestic complaints

In case of cross-border fraudulent EBTs, the break-up will be as follows:

• 65% by RBI

• 20% by customer's bank

In this case, the compensation will be distributed as follows:

• ₹19,118 by RBI

• ₹2,941 by customer's bank

• ₹2,941 by beneficiary bank in case of domestic complaint

In case of cross-border fraudulent EBTs, the break-up will be as follows:

• ₹19,118 by RBI

• ₹5,882 by the customer's bank

" The compensation shall be payable for losses incurred on fraudulent EBTs occurring up to one year from the effective date of these Directions," said.

Can you recover over ₹25,000?

Yes. ₹25,000 is the compensation limit that any victim of an EBT fraud will certainly get if the total loss is up to ₹50,000.

If the loss amount is more than ₹25,000 but less than ₹50,000, the customer can get the full amount back if any more recovery is made by the bank. RBI has explained this with the help of the following examples:

• Recovery made and credited to the customer before compensating: ₹15,000

• Net loss faced by the customer: ₹25,000

• Compensation to be paid to the customer (85% of net loss): ₹21,250

• RBI's contribution: ₹16,250

• Customer’s bank and beneficiary bank to pay ₹2,500 each

• Compensation paid: ₹25,000

• RBI contribution: ₹19,118

• Contribution of the customer’s bank and beneficiary bank: ₹2,941 each

• Recovery made: ₹40,000

In this case, the apportionment of recovery will be as follows:

• To customer: ₹15,000

• To RBI: ₹19,118

• To customer’s bank and beneficiary bank: ₹2,941 each

• Compensation paid: ₹25,000

• RBI contribution: ₹19,118

• Contribution of the customer’s bank and beneficiary bank: ₹2,941 each

• Recovery made after payment of compensation: ₹15,000

• Net loss: ₹25,000

• Compensation payable: ₹21,250

• Additional amount payable: ₹15,000 + ₹21,250 - ₹25,000 = ₹11,250

In this case, the apportionment of recovery will be as follows:

• To customer: ₹11,250

• To RBI: ₹19,118–6,250 = ₹2,868

• To the customer’s bank and beneficiary bank: ₹2941 - ₹2,500 = ₹441 each

However, these new directions announced on Wednesday, 25 June 2026, will not apply to cases where the loss amount is above ₹50,000. In such cases, the recovery will be done based on the existing operating procedures.