New Delhi: In a major relief for victims of cyber fraud, the Reserve Bank of India (RBI) has introduced new rules aimed at ensuring quicker refunds for customers who lose money in online scams. Under the revised framework, banks will be required to credit the disputed amount back to the customer’s account within five days through a “shadow reversal” or temporary credit, subject to certain conditions. The new regulations will come into effect from January 1, 2027.
With cybercriminals constantly inventing new ways to deceive people through fake links, OTP fraud, phishing attacks, and so-called “digital arrest” scams, thousands of customers continue to lose their savings despite repeated awareness campaigns. The RBI’s latest move is expected to provide significant financial protection and improve confidence in digital banking.
According to the new guidelines, if a fraudulent transaction occurs due to a bank’s negligence or system failure, the bank will be fully responsible for reversing the transaction and refunding the entire amount, regardless of whether the customer has filed a complaint.
In cases where the fraud is caused by third-party hacking without any fault on the part of either the customer or the bank, customers must report the incident within five days of the transaction. If reported within the prescribed time, the bank must restore the disputed amount with the original transaction date, ensuring that the customer does not incur any additional interest or charges.
However, customers who voluntarily share confidential information such as OTPs, passwords, PINs, or banking credentials with fraudsters will generally be held responsible for the resulting financial loss.
The RBI has also introduced a special one-time relief for first-time victims of digital fraud. Customers who lose up to ₹50,000 in their first cyber fraud incident may be eligible to receive 85% of the lost amount, subject to a maximum compensation of ₹25,000. For domestic fraud cases involving amounts below ₹29,412, the RBI will bear 65% of the compensation, while the customer’s bank and the beneficiary bank will each contribute 10%.
To strengthen fraud prevention, all banks will also be required to send free, real-time SMS alerts for every electronic transaction of ₹500 or more. Banks may decide whether to send alerts for transactions below ₹500, but they will not be permitted to charge customers for such notifications.
The RBI has directed all commercial banks, small finance banks, payment banks, and cooperative banks to implement these regulations from January 1, 2027, marking a significant step toward improving customer protection in India’s rapidly expanding digital banking ecosystem.
