Digital fraud cases: RBI plans compensation up to Rs 25,000 even if victim shares OTP, Pg1

Key Highlights:

• The RBI plans to compensate up to Rs 25,000 for losses from small-value digital fraud, even if the victim shared their OTP.
• This compensation is applicable once in a lifetime for each customer.
• The RBI will compensate 70% of the loss, with the customer and bank sharing the remaining 30%.
• The pay-out will be made from the surplus income accrued on the Deposit Education and Awareness Fund.
• The RBI will issue draft guidelines for public consultation on mis-selling of financial products, loan recovery practices, and limiting customer liability in unauthorized transactions.

Detailed Insights:

• The initiative aims to cover close to 65% of fraud cases involving amounts less than Rs 50,000, enhancing customer protection against digital payment fraud.
• The Deposit Education and Awareness Fund, which includes unclaimed deposits, will be utilized to provide compensation, ensuring financial resources are available.
• Draft guidelines will address mis-selling by promoting transparency, regulate loan recovery to prevent harassment, and limit customer liability in unauthorized electronic transactions.
• The RBI is considering measures like lagged credits and additional authentication for vulnerable users to enhance the safety and security of digital payments.

Key Concepts Involved:

• OTP (One-Time Password): A password that is valid for only one login session or transaction.
• Digital Fraud: Deceitful activity using online platforms, including unauthorized transactions and identity theft.
• Deposit Education and Awareness Fund: A fund maintained by the RBI to promote financial literacy and customer awareness.