The Reserve Bank of India (RBI) has introduced new regulations designed to protect bank customers from financial losses due to fraudulent activities. The new framework mandates that banks compensate customers for minor fraudulent transactions up to ₹25,000, marking a significant step forward in customer protection within the banking sector. These regulations establish clear compensation mechanisms and demonstrate the RBI's commitment to comprehensive customer security measures.

Key Aspects of the New Compensation Framework

The RBI's new regulations aim to enhance customer confidence in the banking system by providing clear recourse mechanisms for fraud victims. Here's a breakdown of the key provisions:

• Compensation for Minor Frauds: The regulations specifically address compensation mechanisms for customers who fall victim to minor fraudulent activities, ensuring that banking institutions take greater responsibility for customer security.
• Reporting Timeframe and Liability:
  • If a customer reports a fraudulent transaction within 3 working days, they will have zero liability. The bank is responsible for providing full credit within 10 working days.
  • If the fraud is reported between 4 to 7 working days, the customer's liability is limited to a maximum of ₹25,000 depending on the type of account. In such cases, the bank must refund the amount within 10 working days.
  • If the fraudulent transaction is reported after 7 working days, the customer's liability will be determined based on the bank's board-approved policy, which must be transparent and publicly disclosed.
• Negligence: If the unauthorized transaction occurs due to the customer's negligence (e.g., sharing OTPs or account details), the customer bears full liability until the transaction is reported. However, any loss occurring after reporting the unauthorized transaction is borne by the bank.
• Bank's Negligence: If the fraud happens due to the bank's negligence, such as system failure, the customer has zero liability.
• Resolution Timeline: Banks must resolve all fraud complaints within 90 days from the date of receipt of the complaint.
• Shadow Reversal: Upon receiving a fraud report, banks must credit the disputed amount (shadow reversal) to the customer's account within 10 working days. This is done without waiting for an insurance claim settlement.

RBI's broader efforts to protect customers

This latest regulatory announcement represents a major development in the RBI's ongoing efforts to strengthen customer protection standards. In line with this, in December 2025, the RBI announced that it was set to issue uniform norms to curb mis-selling by banks and financial institutions, with the aim to protect customers and improve transparency in financial services.

The RBI had previously issued guidelines in July 2017 to protect customers from unauthorized electronic banking transactions. These guidelines set a standardized framework for reporting, liability, and resolution timelines in cases of fraudulent electronic transactions. The new compensation framework reinforces these earlier guidelines and provides a more comprehensive approach to customer protection.

The RBI has also directed Credit Information Companies (CICs) and Credit Institutions (CIs) to implement a compensation framework for delayed updation or rectification of credit information. As per the circular dated October 26, 2023, CIs have 21 calendar days and CICs have 9 calendar days to resolve a dispute, totaling 30 days. If the dispute resolution exceeds 30 days, the customer is entitled to a compensation of ₹100 for each day of delay. This compensation will be credited to the account information shared at the time of dispute initiation.

By implementing these measures, the RBI aims to foster a safer and more secure banking environment for customers, ensuring that their rights are protected and that they are adequately compensated for any financial losses incurred due to fraudulent activities.