Lost money in an online fraud? Here's how much you can recover under RBI's new rules and who pays

If you have lost money to a digital fraud, you may no longer have to bear the entire loss. The Reserve Bank of India's latest directions on responsible business conduct by banks are set to strengthen consumer protection by making it easier for victims of small-value digital banking frauds involving losses of up to ₹50,000 to recover their money.

The new rules will come into effect from January 1, 2027 for a year. Under the framework, the burden of proving customer liability in complaints related to fraudulent electronic banking transfers (EBTs) will rest with banks.

This means that in many cases involving unauthorised digital transactions, banks will have to establish that the customer was responsible for the loss before denying compensation, offering stronger protection to fraud victims.

How much compensation will be given?

As per RBI's directions, such victims will be eligible for a compensation of up to ₹25,000, provided the value of the fraudulent transaction does not exceed ₹50,000. The benefit is available only once during a customer's lifetime.

"A bona fide victim, being an individual person, including a sole proprietor, and having lodged a complaint involving gross loss of an amount up to ₹50,000 on account of fraudulent EBT(s)... shall be compensated 85 per cent of the net loss amount (calculated after reducing recoveries made, whether before or after paying the compensation, from the gross loss amount), or ₹25,000, whichever is less, once during her / his lifetime...," the directions read.

However, citizens must note that the compensation is not a flat ₹25,000. Eligible customers can receive 85% of the net loss, after deducting any amount already recovered, or ₹25,000, whichever is lower.

For example, if an individual loses ₹30,000 in a digital scam and the bank later recovers ₹10,000, the net loss comes down to ₹20,000. Since, the compensation is calculated at 85% of the net loss, the customer would be entitled to ₹17,000.

Similarly, if the net loss is ₹40,000, 85% of the loss comes out to ₹34,000. However, as the apex bank has capped the compensation at ₹25,000 for eligible cases, the customer would receive the maximum amount of ₹25,000.

Meanwhile, cases that involve losses exceeding ₹50,000 are not covered under these directions. In such situations, the recovery will be done based on the existing operating procedures.

Who will pay this compensation to the customer?

Eligible customers will receive compensation directly from the bank where they hold the account and not from RBI. The bank will investigate the complaint, calculate the amount after adjusting recoveries and credit the amount to the person's bank account.

While customers receive compensation from their banks, the financial burden is ultimately shared between the apex bank and participating banks. Under the framework, the contribution by each varies depending on the value of the fraud and whether the fraudulent transaction was domestic or cross-border.

For eligible cases where the net loss is below ₹29,412, the RBI will bear the largest share of compensation, while the customer's bank and, in the case of domestic transactions, the beneficiary bank will contribute the remaining amount. For higher losses, ranging from ₹29,412 and ₹50,000, compensation will remain capped at ₹25,000, with the apex bank and lenders contributing fixed amounts as prescribed under the framework.

This initiative aims to ensure that victims of online scams are not left alone in such situations. The move also comes at a time when digital payment frauds are rising alongside the rapid growth of online transactions, particularly UPI.

Transactions through the Unified Payments Interface (UPI) touched an all-time high in May, with the total value of transactions surging to ₹29.90 lakh crore and volumes reaching 23.2 billion, according to NPCI data.