Published: 15 February 2026RBI / Business StandardEconomy
RBI Proposes Digital Fraud Compensation Framework: Up to ₹25,000 for Victims of Unauthorized Digital Transactions
AQuick answer
The RBI's February 2026 draft framework proposes compensation of up to ₹25,000 (or 85% of loss, whichever is lower) for victims of unauthorized digital transactions up to ₹50,000 — covering UPI, internet banking, and card payments — effective July 1, 2026, addressing 13.42 lakh UPI fraud cases in FY24.
In February 2026, the Reserve Bank of India (RBI) released a draft framework proposing mandatory compensation of up to ₹25,000 for victims of small-value unauthorized digital transactions — a landmark shift from a customer-liability model to a shared responsibility framework for digital payment fraud.
Under the proposed rules, customers who suffer fraudulent electronic transactions of up to ₹50,000 may claim compensation equal to 85% of the actual loss or ₹25,000, whichever is lower, provided the fraud is reported within five days to the bank and the National Cyber Crime Portal (cybercrime.gov.in). The framework covers UPI transactions, internet banking, card-not-present transactions, and other retail digital payment channels. Banks, the beneficiary bank, and other regulated entities will contribute to a shared compensation fund managed by the RBI and NPCI. The draft directions are proposed to take effect from July 1, 2026, with public feedback invited until April 6, 2026.
The proposal addresses a critical gap: UPI fraud cases reached 13.42 lakh incidents in FY 2023–24 with losses of approximately ₹1,087 crore. India's rapidly expanding digital payment ecosystem — with UPI processing over 16 billion transactions per month as of early 2026 — makes consumer protection mechanisms essential for sustaining public trust. For Rajasthan, where rural digital payment adoption accelerated through the Jan Dhan Yojana network, this framework is particularly significant.
Mains angle
Q: Evaluate how the RBI's 2026 draft digital-fraud compensation framework reshapes consumer liability for small-value unauthorized transactions and strengthens trust in India's UPI-led digital payment ecosystem.
Answer (50 words):
The RBI's February 2026 draft framework proposes mandatory compensation of ₹25,000 or 85% of actual loss, whichever lower, for unauthorized digital transactions up to ₹50,000 reported within five days. Covering UPI, internet banking, and card payments, effective July 1, 2026, it addresses 13.42 lakh FY24 UPI fraud cases worth ₹1,087 crore.
6-axis classification
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Practice MCQ from this story
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Linked questionEasy
Which institution proposed the Digital Fraud Compensation Framework?
Explanation · Correct answer CThe Reserve Bank of India proposed a stronger consumer-protection framework for digital payment frauds through its payments policy work. The proposal focuses on limiting customer liability and creating a clearer compensation mechanism for eligible victims of small-value digital frauds, so RBI is the correct institution.
Frequently asked questions
What does the RBI's Digital Fraud Compensation Framework propose and from when is it effective?
The RBI released a draft Digital Fraud Compensation Framework in February 2026. It proposes compensation for victims of unauthorized digital transactions up to ₹50,000 and is effective from July 1, 2026.
How is the compensation amount calculated under the proposed framework?
Victims are eligible for compensation of up to ₹25,000 or 85% of their loss, whichever is lower, for unauthorized digital transactions up to ₹50,000.
Which types of digital payments are covered under this framework?
The framework covers UPI payments, internet banking transactions, and card-based (debit/credit) transactions — the three major modes of digital payment in India.
What scale of UPI fraud prompted this framework?
The framework is a direct response to the 13.42 lakh (1.342 million) UPI fraud cases reported in FY2023-24, signalling a sharp rise in digital financial crime.
Who is responsible for processing compensation claims under the proposed rules?
Banks and payment service providers will be responsible for processing compensation claims under the framework. The draft is open for public consultation before final notification.
