RBI to compensate customers up to ₹25,000 for small-value digital frauds; unveils new consumer protection measures
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Reserve Bank of India (RBI) Governor Sanjay Malhotra on Friday announced a new framework to compensate bank customers for losses arising from small-value fraudulent transactions, with compensation capped at ₹25,000. The move is aimed at strengthening customer protection amid the rapid expansion of digital banking and payment systems.
Announcing the final bi-monthly monetary policy for the current financial year, Malhotra said the RBI will shortly issue draft revised instructions for public consultation, including a formal compensation mechanism for small-value frauds. “It is proposed to introduce a framework to compensate customers up to an amount of ₹25,000 for loss incurred in small-value fraudulent transactions,” he said.
The Governor noted that the existing guidelines on limiting customer liability in unauthorised electronic banking transactions were issued in 2017. Given the sharp rise in digital adoption since then, these instructions have been comprehensively reviewed to reflect current risks and usage patterns.
Digital payment safety
As part of a broader push to enhance digital payment safety, Malhotra said the RBI will also publish a discussion paper outlining possible measures such as lagged credits and additional authentication requirements for specific categories of users, including senior citizens.
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Three separate draft guidelines
To further strengthen customer protection, the RBI will issue three separate draft guidelines for public consultation. These will cover misselling of financial products, recovery of loans and engagement of recovery agents, and revised norms on limiting customer liability in unauthorised electronic banking transactions.
Highlighting concerns around misselling, Malhotra said the sale of third-party financial products at bank counters must be aligned with customer needs and risk appetite. “There is a felt need to ensure that products and services sold are suitable for customers and commensurate with their risk profiles,” he said, adding that comprehensive instructions on advertising, marketing, and sales practices will be issued.
Recovery agents and loan recovery practices
The RBI will also review and harmonise existing conduct-related instructions governing recovery agents and loan recovery practices, which currently vary across different categories of regulated entities. Draft guidelines in this regard will also be released for public feedback.
Separately, the Governor announced the launch of Mission SAKSHAM (Sahakari Bank Kshamta Nirman), a sector-wide capacity-building and certification initiative for Urban Co-operative Banks (UCBs). Highlighting the role of UCBs in financial inclusion and serving the unbanked, Malhotra said the next phase of their growth depends on strengthening skills, technical capabilities, and operational resilience.
Under Mission SAKSHAM, around 1.40 lakh participants across functions will be trained through physical programmes and a scalable digital learning platform. Training will be conducted, as far as possible, in locations close to participating UCBs and in regional languages, in partnership with UCB umbrella organisations and national and state federations.