RBI issues draft amendment directions for ‘review of framework of limiting customer liability in digital transactions’

RBI issues draft amendment directions for ‘review of framework of limiting customer liability in digital transactions’

The Reserve Bank of India (RBI) has released draft amendment directions to revise the framework for limiting customer liability in unauthorised digital transactions, aiming to enhance consumer protection in the rapidly expanding digital payments ecosystem. A key component of the proposal is a compensation mechanism for victims of small-value fraudulent transactions, capping reimbursements at ₹25,000. Under this framework, eligible customers would receive compensation equivalent to 85% of the loss or ₹25,000, whichever is lower, with the RBI covering 70% of the cost, banks absorbing 15%, and customers bearing the remaining 15%. This one-time lifetime benefit is designed to address the growing prevalence of small-ticket frauds, which account for approximately 65% of reported cases involving amounts below ₹50,000.

The draft also introduces safeguards to prevent misuse, such as mandatory prompt reporting and limits on claim frequency. Notably, compensation would extend to cases where customers inadvertently share transaction OTPs, acknowledging the challenges of attributing fault in sophisticated fraud scenarios. Complementing this, the RBI plans to issue a discussion paper exploring additional measures, including lagged credits and enhanced authentication for vulnerable groups like senior citizens.

These steps follow rising concerns over digital fraud, with India reporting ₹107.21 crore in losses during the first nine months of FY25. By shifting liability-sharing and strengthening pre-transaction safeguards, the RBI aims to balance consumer trust with institutional accountability, ensuring sustainable growth in digital finance. The draft directions are open for public consultation until March 4, 2026.