Digital fraud: RBI revamps rules, widens framework, Pg13

Key Highlights:

• The Reserve Bank of India (RBI) has revised its compensation mechanism for victims of digital payment frauds and expanded its framework for limiting customer liability.
• Victims of fraudulent Electronic Banking Transactions (EBTs) with losses up to ₹50,000 will receive 85% of the net loss or ₹25,000, whichever is less, once in their lifetime.
• To be eligible, victims must report the fraud on the National Cyber Crime Reporting Portal or Helpline (1930) and to their bank within five calendar days of the incident.
• The new directions, outlined in the Reserve Bank of India (Commercial Banks-Responsible Business Conduct) Third Amendment Directions, 2026, will be effective from January 1, 2027.
• A cost-sharing model has been introduced, distributing the compensation burden among the RBI, the customer's bank, and the beneficiary bank.

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Detailed Insights:

• For fraudulent EBTs involving losses less than ₹29,412, the RBI will bear 65% of the compensation, the customer's bank 10%, and the beneficiary bank 5%.
• In cases of cross-border fraudulent EBTs with losses less than ₹29,412, the RBI will cover 65% and the customer's bank 20%.
• For losses between ₹29,412 and ₹50,000, where compensation is capped at ₹25,000, the RBI will contribute ₹19,118, and both the customer's bank and beneficiary bank will contribute ₹2,941 each.
• In cross-border fraudulent EBTs within the ₹29,412 to ₹50,000 range, the RBI will contribute ₹19,118 and the customer's bank ₹5,882.
• A beneficiary bank is defined as the bank where the fraudulently debited amount is initially credited.
• This move aims to enhance consumer confidence in digital payment systems by providing a clearer and more structured compensation framework.

Key Concepts Involved:

• Electronic Banking Transaction (EBT): Any transaction conducted through electronic channels such as internet banking, mobile banking, or UPI.
• National Cyber Crime Reporting Portal: An online platform for citizens to report cybercrime complaints, managed by the Ministry of Home Affairs.
• Beneficiary Bank: The financial institution that receives funds in a transaction, often the first bank to credit a fraudulently debited amount.