RBI is going out of its way to compensate fraud victims. It doesn’t have the mandate |
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RBI is going out of its way to compensate fraud victims. It doesn’t have the mandate
The RBI may consider evaluating the structural reasons why banks do not invest in fraud protection.
Most of us in India have now become accustomed to authorised push payment (APP) frauds—such as phishing emails, or threats of digital arrests—where customers are tricked into making the transfer themselves. Reports suggest that there were around 28 lakh cyber frauds in 2025, amounting to Rs 22,931 crore.
On 6 March 2026, the Reserve Bank of India released a proposal under which victims of such frauds, involving gross loss up to Rs 50,000, could receive partial compensation—85 per cent of the net loss or Rs 25,000, whichever is lower. The mechanism, however, is available only once in a customer’s lifetime. Most strikingly, the RBI itself would bear 65 per cent of the compensation cost, with the remainder split between the sending and receiving banks.
While one can understand the policy instinct of bringing such transactions into a compensation net, there are serious concerns about its design.
Difficulties in the proposal
First, there’s a practical problem of verifying whether the transaction was indeed fraudulent. The burden of proof for customer eligibility lies with the bank, but this requires that banks have the data, the systems, and the incentive to check. When 65 per cent of the cost is borne by the RBI—at least once in the customer’s lifetime—the bank will have limited incentive to conduct rigorous due diligence.
More troubling is........