RBI Draft: New Rules for Customer Liability in Digital Transactions

RBI Proposes New Rules to Strengthen Customer Protection in Digital Transactions​

RBI Issues Draft Amendment on Customer Liability for Digital Payments​

The Reserve Bank of India has released a draft amendment to the rules governing customer liability in digital banking transactions. The proposal aims to enhance safeguards for users and introduce a structured compensation mechanism for small value digital fraud cases.

The central bank has invited public comments on the draft framework until April 6, 2026. If finalized, the revised rules are expected to come into effect from July 1, 2026.

Expanded Definition of Authorized Electronic Banking Transactions​

Under the proposed amendment, the RBI has expanded the definition of authorized electronic banking transactions. The definition will now include payments made under deception, coercion, or fraud.

Electronic banking transactions under the framework will cover both card present and card not present payments. The draft also introduces a new category called fraudulent electronic banking transaction.

In complaints related to digital fraud, the responsibility will lie with banks to prove whether the customer is liable for the transaction.

Zero Liability for Customers in Certain Fraud Cases​

The draft rules outline several scenarios in which customers will not bear any financial liability.

Customers will have zero liability if a fraudulent transaction occurs due to negligence on the part of the bank. They will also have zero liability in cases involving third party breaches if the incident is reported within five days of the transaction.

Banks will be required to send instant SMS alerts for all digital transactions exceeding ₹500. They must also provide round the clock channels for customers to report digital fraud.

Compensation Framework for Small Value Digital Fraud​

The RBI has proposed a compensation structure to address small value digital fraud cases. Under this framework, losses of up to ₹50,000 will qualify for compensation.

Victims will be eligible to receive 85 percent of the net loss or ₹25,000, whichever is lower. This compensation can be availed once in a lifetime by an individual. To qualify, the fraud must be reported to both the bank and the national cybercrime portal within five days.

Cost Sharing Between RBI and Banks​

The draft framework specifies how compensation will be shared between the RBI and banks.

For fraud losses below ₹29,412, the RBI will bear 65 percent of the compensation amount. The customer’s bank and the beneficiary bank will each bear 10 percent.

For losses between ₹29,412 and ₹50,000, the compensation will be capped at ₹25,000. In such cases, the RBI will contribute ₹19,118, while the customer’s bank and the beneficiary bank will contribute ₹2,941 each.

Banks will be required to process and pay the compensation within five days of receiving the application. They can later seek reimbursement from the RBI on a quarterly basis.