RBI Unveils ₹25,000 Compensation Framework for Small-Value Digital Fraud Victims
In a significant move to bolster consumer protection in India's rapidly evolving digital banking landscape, the Reserve Bank of India (RBI) has proposed a new framework to compensate customers for losses incurred due to small-value fraudulent transactions. Announced by RBI Governor Sanjay Malhotra during the final bi-monthly monetary policy meeting for the current financial year, the initiative aims to provide financial relief up to ₹25,000 for victims of such frauds.
Enhanced Digital Payment Safety and Customer Protection Measures
Governor Malhotra emphasized that the central bank will soon publish a comprehensive discussion paper outlining potential measures to enhance the safety of digital payments across the country. These measures may include the implementation of lagged credits and additional authentication protocols, particularly for vulnerable user groups such as senior citizens, to mitigate risks associated with unauthorized transactions.
Furthermore, the RBI is set to issue three critical draft guidelines focused on strengthening customer safeguards. The first guideline addresses the pervasive issue of mis-selling financial products and services by regulated entities, ensuring that third-party offerings sold at bank counters align with customer needs and individual risk appetites. The second guideline harmonizes regulations concerning loan recovery practices and the engagement of recovery agents, while the third revises existing instructions on limiting customer liability in unauthorized electronic banking transactions.
Revising Outdated Frameworks for Modern Banking
The current instructions on customer liability for unauthorized electronic transactions, established in 2017, have been reviewed in light of the rapid technological adoption in banking and payment systems. Governor Malhotra highlighted that the draft revised instructions, which include the proposed compensation framework for small-value fraudulent transactions, will be released shortly for public consultation. This review aims to address evolving fraud scenarios and timelines, ensuring that regulatory frameworks remain robust and responsive to contemporary challenges.
Mission SAKSHAM: Empowering Urban Cooperative Banks
In parallel, the RBI announced the launch of Mission SAKSHAM (Sahakari Bank Kshamta Nirman), a sector-wide capacity-building and certification initiative targeted at Urban Cooperative Banks (UCBs). Recognizing UCBs as vital institutions for promoting financial inclusion and serving unbanked populations, the mission seeks to develop stronger skills, technical capabilities, and operational resilience within these banks.
The capacity-building program will be implemented through extensive physical training sessions and a scalable digital learning platform, aiming to cover approximately 1.40 lakh participants across various functions. To ensure accessibility, training will be conducted at locations near participating UCBs, with content delivered in regional languages wherever feasible. This initiative will be pursued in collaboration with umbrella organizations and national/state federations of UCBs.
A Holistic Approach to Financial Security
The RBI's proposals represent a multifaceted approach to enhancing financial security in India. By introducing compensation for fraud victims, tightening regulations on mis-selling and loan recovery, and investing in the capacity of cooperative banks, the central bank aims to foster a more secure and inclusive banking ecosystem. These measures underscore the RBI's commitment to adapting regulatory frameworks to the demands of digital transformation while prioritizing consumer protection.
As digital payments continue to gain traction, the proposed frameworks and guidelines are expected to play a crucial role in safeguarding customers against fraud and ensuring the integrity of India's financial systems. Stakeholders and the public will have the opportunity to provide feedback during the consultation periods for the draft instructions, shaping the final implementation of these protective measures.
