RBI Governor Announces Sweeping Customer Protection Measures Including ₹25,000 Digital Fraud Compensation
In a landmark announcement aimed at fortifying consumer trust in India's digital financial landscape, Reserve Bank of India Governor Sanjay Malhotra unveiled a comprehensive suite of protective measures during the Monetary Policy Committee press conference on February 5, 2026. The central bank's proactive initiatives are designed to empower customers and enhance the security framework surrounding electronic transactions across the nation.
Enhanced Customer Protection and Digital Fraud Compensation
Governor Malhotra emphasized the RBI's unwavering commitment to customer protection by revealing plans to introduce three critical draft guidelines. These will address persistent industry concerns including mis-selling practices, loan recovery procedures involving recovery agents, and limiting customer liability in cases of unauthorised electronic banking transactions.
The most significant announcement came in the form of a proposed compensation framework for victims of digital fraud. "It is also proposed to introduce a framework to compensate customers up to an amount of ₹25,000 for losses incurred in small-value fraudulent transactions," declared Governor Malhotra. This measure represents a substantial step toward building consumer confidence in digital payment systems.
Furthermore, the RBI will publish a comprehensive discussion paper exploring additional safety measures for digital payments. These potential enhancements may include lagged credits and additional authentication protocols specifically designed for vulnerable user groups such as senior citizens, ensuring tailored protection for those most at risk.
Advancing Financial Inclusion and Credit Flow
The RBI has completed thorough reviews of several key financial inclusion schemes, including the Lead Bank Scheme, Kisan Credit Card Scheme, and the Business Correspondent Model. Draft revised guidelines for these programs will be issued shortly, accompanied by the launch of a unified reporting portal to improve data management for the Lead Bank Scheme.
In a move to bolster small and medium enterprises, the collateral-free loan limit for MSMEs will be doubled from ₹10 lakh to ₹20 lakh. Additionally, to stimulate financing in the real estate sector, banks will be permitted to lend to Real Estate Investment Trusts (REITs) with appropriate prudential safeguards in place.
Strengthening Urban Cooperative Banks
Governor Malhotra announced four specific measures to enhance the operational capacity of Urban Cooperative Banks (UCBs). The first two initiatives involve raising financial limits for unsecured loans and loans to nominal members. "We also propose to remove the tenor and moratorium related requirements on housing loans given by Tier III and Tier IV UCBs," he added, providing greater flexibility for these institutions.
To address capacity building, the RBI will launch Mission-SAKSHAM (Sahakari Bank Kshamta Nirman), an ambitious training program designed to enhance managerial and technical expertise across UCBs. This mission aims to train over 140,000 participants from urban cooperative banks nationwide.
Promoting Ease of Doing Business for NBFCs
In a significant regulatory relaxation, NBFCs with no public funds and customer interface, and with asset sizes not exceeding ₹1,000 crore, will be exempted from registration requirements. Furthermore, certain NBFCs will no longer need prior approval to open more than 1,000 branches, streamlining their expansion processes.
Deepening Financial Markets
The RBI Governor confirmed that revised regulations for External Commercial Borrowings (ECBs) have been finalized and will be notified shortly. In another major development, the investment limit under the Voluntary Retention Route (VRR) will be removed entirely, though investments will remain subject to category-specific ceilings under the General Route.
Following the 2026 Budget announcements, the RBI also plans to introduce a regulatory framework for derivatives on corporate bond indices and total return swaps on corporate bonds. Additionally, draft revised guidelines for Authorised Dealer banks and stand-alone primary dealers will provide greater flexibility in foreign exchange transactions.
Key Takeaways from the Announcement
- The RBI has introduced groundbreaking compensation measures for victims of small-value digital frauds, with up to ₹25,000 in reimbursement.
- Mission-SAKSHAM represents a major capacity-building initiative for urban cooperative banks, targeting over 140,000 participants.
- New regulations for non-banking financial companies will significantly ease operational constraints and promote business expansion.
- Comprehensive reviews of financial inclusion schemes aim to enhance credit flow and support for MSMEs and agricultural sectors.
- The removal of investment limits under VRR and new frameworks for corporate bond derivatives signal deeper financial market development.
These sweeping measures collectively represent the RBI's multifaceted approach to strengthening India's financial ecosystem, balancing robust customer protection with initiatives to promote financial inclusion, ease of doing business, and market depth. The announcements underscore the central bank's proactive stance in addressing emerging challenges in an increasingly digital financial landscape while supporting broader economic growth objectives.
