The Reserve Bank of India has issued revised directions for Regional Rural Banks on customer protection in fraudulent electronic banking transactions, replacing the existing framework on limiting customer liability. The new rules apply to electronic banking transactions undertaken on or after Jan. 1, 2027, and set out how liability must be allocated between the customer, the bank and third parties, alongside new requirements on alerts, complaint handling and compensation. Customers will have zero liability where the fraud stems from negligence or deficiency by the Regional Rural Bank, regardless of when it is reported, and also in third-party breach cases if the unauthorised transaction is reported within five calendar days. In cases of customer negligence, the customer bears the loss until reporting, while any unauthorised transactions after reporting must be borne by the bank. Regional Rural Banks must adopt a transparent policy covering customer rights and obligations, reporting channels, complaint resolution timelines and awareness measures, and publish it on their websites. They must send instant SMS alerts for all electronic banking transactions above INR 500, email alerts where an email address is available, maintain 24x7 reporting channels, register fraud reports as complaints and issue immediate acknowledgements. The burden of proving customer liability rests with the bank. Complaints must be examined and resolved within no more than 45 calendar days for domestic cases and 60 calendar days for cross-border cases. Where reversals are due, they must be value-dated to the original transaction date so customers do not lose interest or incur extra charges. For fraudulent credit card transactions, a shadow reversal equal to the disputed amount must be provided within five calendar days of notification. The directions also introduce a compensation mechanism for small-value fraudulent electronic banking transaction losses caused by customer-negligence cases that still qualify for relief. A bona fide individual, including a sole proprietor, who suffers a gross loss of up to INR 50000 and reports the fraud both to the National Cyber Crime Reporting Portal or helpline 1930 and to the bank within five calendar days can receive 85 per cent of the net loss or INR 25000, whichever is lower, once in a lifetime. The Reserve Bank, the customer’s bank and, for domestic cases, the beneficiary bank will share the compensation under prescribed formulas. This compensation window applies to losses on fraudulent transactions occurring for one year from the effective date of the directions.
Reserve Bank of India2026-06-24
Reserve Bank of India revises regional rural bank customer protection rules for fraudulent electronic transactions and adds compensation up to INR 50000
The Reserve Bank of India has overhauled Regional Rural Bank rules on fraudulent electronic banking transactions for transactions from Jan. 1, 2027. The framework gives customers zero liability in bank-fault cases and in third-party breach cases reported within five days, requires faster alerts and complaint handling, and places the burden of proving customer liability on the bank. It also creates a one-time compensation mechanism of up to INR 25000 for eligible small-value losses up to INR 50000.