RBI Proposes Limited Relief Framework for Small-Value Cyber Fraud Losses

The Reserve Bank of India (RBI) is preparing to roll out a new compensation framework aimed at providing limited financial relief to victims of small-value online fraud, a segment that accounts for the majority of cybercrime cases by volume.

Under the proposed mechanism, individuals who suffer unintended losses of up to ₹50,000 in digital payment frauds may receive compensation capped at ₹25,000. The draft guidelines are expected to be released for public consultation shortly.

According to the RBI, the framework is designed to address the reality that while small-ticket frauds make up nearly 65% of reported cases, they represent less than 10% of the total value of losses. To balance accountability, the burden of compensation will be shared: the affected customer and the bank will each absorb 15% of the loss, while the remaining portion—up to the prescribed cap—will be paid from the RBI’s Depositor Education and Awareness Fund.

Notably, the central bank has indicated that victims will not be denied relief solely for having shared credentials such as one-time passwords (OTPs), provided the transaction was unintended and not carried out in bad faith. Limited checks will be conducted to prevent misuse of the scheme.

RBI Governor Sanjay Malhotra said the initiative is intended to provide practical relief without encouraging reckless behaviour, adding that the relatively low cap reduces the risk of moral hazard. Deputy Governor Swaminathan J echoed the view, stating that the financial impact on the system would remain manageable while benefiting a large number of affected customers.

Alongside the compensation proposal, the RBI is also working on broader measures to strengthen digital payment safety, including delayed credits to suspicious accounts and enhanced authentication for vulnerable user groups such as senior citizens.