RBI Cyber-Fraud Compensation Scheme

Why in News?

Recently, the rising digital payment frauds and low recovery rates prompted the RBI to introduce a cyber-fraud compensation scheme.

• It is a new consumer protection measure by the Reserve Bank of India.
• Aim – To provide financial protection to victims of small-value digital frauds and enhance trust in digital payment systems.
• Objective – Protect consumers against financial losses from unauthorised digital transactions.
• Clarify liability and redressal mechanism for banks and payment service providers.
• RBI Observations – Card & Internet Frauds (2024‑25) –More than 13,000 cases reported in the banking sector, involving Rs 520 crore.
• National Cyber Crime Portal Complaints (2025) – Up by 25% compared to 2024, reaching 24.03 lakh cases.
• Small-Value Frauds – Account for more than two-thirds of fraud cases but less than 15% of total monetary losses.
  • 65% of frauds involve amounts smaller than Rs 50,000.
• Key Features – Maximum Compensation – Rs. 25,000 per case or 85% of loss, whichever is lower.
• Eligible Victims – Customers facing small-value unauthorised digital fraud, including cases where OTP was shared.
• Shared Liability –
  • RBI around 70% of compensation
  • Banks around 15%
  • Customer around 15% to encourage vigilance.
• Funding Source – Potentially RBI’s Depositor Education and Awareness (DEA) Fund, with banks contributing their portion of the compensation.
• Eligibility – Victims of digital fraud via UPI, cards, and net banking.
• Condition – One-time compensation per individual for their lifetime. Timely reporting and submission of proof required.
• Implementation – RBI will issue draft guidelines, with banks implementing them for fast and automatic compensation.
• Significance –
• Strengthens consumer protection in digital finance.
• Reduces the financial vulnerability of small victims.
• Encourages wider adoption of secure digital payments.

Reference

IE | RBI Cyber-Fraud Compensation Scheme