On February 6, 2026, Reserve Bank of India (RBI) Governor Sanjay Malhotra announced a groundbreaking proposal to compensate bank customers up to ₹25,000 for losses incurred due to small-value digital frauds.
This initiative was a key highlight of the RBI’s first Monetary Policy Committee (MPC) meeting of 2026, aimed at building trust in India’s rapidly expanding digital payment ecosystem.
1. The ₹25,000 Fraud Shield
The new framework addresses “small-value” fraudulent transactions, which often cause disproportionate harm to individuals and first-time digital users.
- Coverage: It provides a safety net for unauthorized electronic banking transactions, covering losses up to a cap of ₹25,000.
- Objective: To shift the burden of proof and financial recovery from the consumer to the regulated entities (banks and payment providers), encouraging them to adopt more proactive risk prevention.
- Process: The RBI will shortly issue draft revised instructions for public consultation to finalize the mechanics of this compensation.
2. Enhanced Safety for Vulnerable Users
Beyond direct compensation, the RBI is proposing additional friction-based safety measures to protect specific demographics:
- Discussion Paper: The central bank will publish a paper on enhancing digital payment safety.
- Lagged Credits: For certain transactions, the RBI is considering “lagged credits,” which would introduce a small delay before funds are accessible, giving victims time to flag fraud.
- Senior Citizen Protection: Additional authentication layers may be mandated for senior citizens and other users identified as high-risk.
3. Broad Consumer Protection Reforms
The ₹25,000 compensation is part of a larger “Customer Protection Trio” of guidelines announced during the policy meet:
- Curbing Mis-selling: New draft guidelines will hold banks accountable for selling unsuitable third-party financial products (like insurance or risky investments) at bank counters.
- Loan Recovery Norms: Stricter regulations are being drafted to address harassment by loan recovery agents and ensure fair collection practices.
- Limiting Liability: An update to the 2017 rules on “limiting liability of customers in unauthorized electronic banking transactions” to reflect 2026’s technological landscape.
4. Monetary Policy Highlights (Feb 2026)
While the consumer protection news stole the headlines, the RBI also maintained its broader economic stance:
- Repo Rate: Kept unchanged at 5.25% for the second consecutive meeting.
- Stance: Maintained a “neutral” policy stance, signaling flexibility as inflation stabilizes.
- Growth Upgrade: Raised GDP growth projections for the first half of FY27, citing robust domestic demand.
Conclusion: A Shift in Accountability
The RBI’s message in early 2026 is clear: consumer protection must keep pace with digital adoption. By introducing a formal compensation framework for small-value frauds, the central bank is forcing financial institutions to move from “reactive dispute handling” to “proactive risk prevention.”
