The customer will have zero liability and the right to reverse the transaction if the fraud is caused by the bank’s negligence or third party breach.
The regulator has proposed putting the burden of proving customer liability on banks in such cases. The draft regulations state that the guidelines will apply to electronic banking transactions conducted from 1 July 2026.
Institutions According to the Reserve Bank of India, nearly 65% of fraud cases involve amounts of less than Rs 50,000.
Compensation will be paid if the loss is proved to be genuine as per the Bank’s internal policy. The victim should report the incident to the bank and the National Cyber Crime Helpline (1930) within five days of the fraud.
After receiving the complaint, the banks must examine it, determine the responsibility and respond to the customer within 30 days.
The draft framework sets out compensation sharing mechanisms. For losses below Rs 29,412, where the compensation will be 85%, RBI will provide 65%, while the customer bank and the beneficiary bank will contribute 10% each. For losses between Rs 29,412 and Rs 50,000, the RBI will contribute Rs 19,118, while the customer bank and beneficiary bank will contribute Rs 2,941 each. The proposed compensation mechanism will remain in force for one year from the effective date, after which it will be reviewed, RBI said. The aim is to gradually increase the share generated by the banks and in such cases reduce or eliminate the share of the central bank. Organizers have invited stakeholder comments on the draft until April 6, 2026.
The bank’s negligence includes failing to put in place the required security systems, send transaction instructions, provide channels for reporting fraud or act promptly on customer complaints. Customer negligence includes sharing credentials such as PINs, passwords or OTPs, delaying fraud reporting.
