FILE PHOTO: A man walks past an installation of the Rupee logo and Indian currency coins outside the Reserve Bank of India (RBI) headquarters in Mumbai, India, April 9, 2025. REUTERS/Francis Mascarenhas/File Photo | Photo Credit: FRANCIS MASCARENHAS

To enhance protection for customers, the Reserve Bank of India has asked banks to put in place a mechanism for compensation of up to ₹25,000 for small value fraudulent electronic banking transactions (EBTs), mandatorily send instant SMS alerts to its customers for all EBTs of value more than ₹500 and provide 24x7 access through various channels for reporting of fraudulent transactions.

The burden of proving customer liability in complaints involving fraudulent EBTs shall lie on the bank. Accordingly, a Bank shall examine and classify each complaint under the relevant categories of EBTs, per the Reserve Bank of India (Commercial Banks - Responsible Business Conduct) Third Amendment Directions, 2026

A bona fide victim, being an individual person, including a sole proprietor, and having lodged a complaint involving gross loss of an amount up to ₹50,000 on account of fraudulent EBT(s) will be compensated 85 per cent of the net loss amount or ₹25,000, whichever is less, once during her / his lifetime, subject to conditions.

The net loss is calculated after reducing recoveries made, whether before or after paying the compensation, from the gross loss amount.

Banks will establish a “shadow reversal” mechanism, whereby they will give temporary / provisional credit of the amount involved in fraudulent EBT(s).

Shadow reversal will be provided by a bank to a customer on receipt of notification from the customer, before the completion of internal investigation or settlement of insurance claim, if any, or any other settlement to be made with other parties. While the customer shall not be allowed to use such amount, he / she will not bear any additional burden of interest / charges.

A bank shall mandatorily send instant SMS alerts to its customers for all EBTs of value more than ₹500. For EBTs of value up to ₹500, a bank may decide to send instant SMS as per its internal policy but without any charge to the customer.

A bank has to ask its customer, availing the facility of EBTs (other than ATM cash withdrawals), to mandatorily provide her / his mobile number and wherever available, email address.

The bank shall verify the mobile number and email address provided by the customer at the time of onboarding and subsequently at pre-defined intervals prescribed in its policy.

Zero liability

A customer shall be entitled to zero liability and reversal of the transaction in cases where the fraudulent EBT occurs due to negligence / deficiency on the part of the bank, irrespective of whether the transaction is reported by the customer or not.

A customer shall be entitled to zero liability and reversal of the transaction in cases of third-party breach where the customer reports the unauthorised fraudulent EBT to the bank within five calendar days from the date of its occurrence.

In cases of third-party breach reported to the bank after five calendar days, the customer’s liability shall be determined as per the bank’s policy.

A bank has to ensure that a complaint arising out of fraudulent EBT(s) is examined, liability therein is established and response, as applicable, is issued to the customer within such time as may be specified in the bank’s policy.

However, this timeline cannot exceed 45 calendar days from the date of receipt of the complaint by the bank in case of a complaint arising out of domestic fraudulent EBT(s) and 60 calendar days from the date of receipt of the complaint by the bank in case of a complaint arising out of cross-border fraudulent EBT(s).

Reporting

A bank has to provide customers with 24x7 access through channels such as phone banking, SMS, instant messaging, dedicated email address, IVR, a dedicated toll-free helpline, reporting to home branch, etc., for reporting fraudulent EBTs that have taken place and / or loss or theft of debit / credit card, etc.

Further, a Bank has to provide a number in the transaction alert SMS itself, to which the customer can immediately send an SMS to notify her / his objection, if any; and also provide a direct link on the home page of its website and mobile application, if available, for reporting fraudulent EBTs.

Published on June 24, 2026