Mint Explainer | RBI’s digital fraud compensation proposal: Who will get refunds and how it will work

Mint explains how the compensation mechanism could work and why the central bank believes a shared liability framework is needed.RBI has proposed a framework to compensate victims of small-value digital payment fraud, even in cases where the customer may have been partly negligent. The draft guidelines allow partial reimbursement for transactions of up to ₹50,000, with victims potentially receiving up to 85% of the loss or ₹25,000, whichever is lower.

However, the benefit may be available only once in a lifetime for each customer.The idea is to create a structured compensation mechanism in which the financial burden is shared among the issuing bank, the receiving bank and potentially the regulator, ensuring quicker relief for customers who fall prey to cyber fraud.The compensation mechanism targets cases where fraud occurs despite some degree of customer negligence. The RBI defines this as situations where a customer may have unknowingly shared credentials or been tricked into transferring money.According to the draft guidelines, customer negligence includes actions such as “providing credentials such as PIN, password, OTP or other details…to another person” or “downloading malicious apps.” Even in such cases, victims may qualify for partial compensation if they report the fraud quickly.However, customers must notify the bank and the National Cyber Crime Helpline or portal within five calendar days for the claim to be eligible.The RBI’s framework distributes the financial burden across the payment ecosystem.