Indian banks have asked the Reserve Bank of India for a centralised fraud reporting system and clearer operational rules ahead of the central bank's new compensation framework for victims of small-value fraudulent electronic transactions, according to people familiar with the matter. The request underscores the industry's concern that the policy, while designed to strengthen consumer protection, will require precise definitions and a uniform reporting architecture to avoid disputes, delays and uneven implementation.
The framework, set to come into force in January 2027, will provide eligible customers compensation of up to ₹25,000 in cases of small-value electronic fraud. The RBI and banks are expected to share the cost, but lenders are pressing for clarity on several practical questions before the system goes live. These include which customers will qualify, what constitutes timely reporting, how fraud cases will be verified, and how liability will be allocated when transactions involve multiple intermediaries.
Eligibility Questions Mount
At the heart of the industry's concerns is the scope of customer eligibility. Banks want the RBI to define, in operational terms, which account holders can claim compensation and under what circumstances claims may be rejected or reduced. Lenders are particularly focused on whether the framework will cover only specific categories of digital fraud or a broader set of unauthorised transactions across payment channels.
The issue is not merely procedural. A compensation regime of this kind can materially alter how banks manage fraud risk, customer grievance handling and internal controls. If eligibility standards are ambiguous, banks fear a rise in contested claims, inconsistent treatment across institutions and higher compliance costs. A uniform rulebook, they argue, would help ensure that the policy is applied consistently across the banking system.
Reporting Timelines In Focus
Banks are also seeking a centralised mechanism for reporting fraud cases to the RBI, rather than relying on fragmented reporting across multiple channels. Industry executives believe a single reporting platform would improve traceability, reduce duplication and create a common evidentiary record for determining compensation.
Reporting timelines are another major point of uncertainty. Lenders want the central bank to specify how quickly a customer must report a fraudulent transaction after discovery, and what exceptions may apply if the victim was unable to detect the fraud immediately. In digital payments, delays can complicate recovery efforts and make it harder to establish the sequence of events. Banks say the compensation framework will only work if the reporting window is both strict enough to deter misuse and flexible enough to account for genuine cases of delayed detection.
The proposed mechanism is also expected to help banks and regulators identify repeat patterns of fraud, monitor hotspots and track the performance of payment channels. That could become increasingly important as India's digital payments ecosystem continues to expand and fraudsters adapt their tactics across instant transfers, card payments and app-based transactions.
Liability And Cost Sharing
The most sensitive issue for lenders is liability-sharing. While the RBI has indicated that compensation will be shared between the central bank and banks, the industry wants a clearer formula for apportioning losses, especially in cases where responsibility may lie with a customer, a bank, a payment intermediary or a third-party service provider.
Banks are wary of a regime in which they are left to absorb losses arising from frauds that may have originated outside their direct control. They want the RBI to spell out the evidentiary standards required to establish negligence, unauthorised access or procedural lapses. Without such clarity, bankers say, the framework could lead to prolonged disputes and inconsistent outcomes, particularly in high-volume, low-value cases where the administrative cost of adjudication may exceed the transaction amount itself.
The compensation policy is part of a broader regulatory push to strengthen trust in digital payments while ensuring that consumers are not left to bear the burden of small-ticket fraud. For the RBI, the challenge is to strike a balance between consumer protection and operational feasibility. For banks, the priority is to ensure that the new rules are workable, auditable and resistant to misuse.
The coming months are likely to see further engagement between the central bank and the industry as the January 2027 deadline approaches. The final shape of the framework will determine not only how victims of electronic fraud are compensated, but also how India's banking system manages the growing risks of digital transactions in a fast-evolving payments landscape.