The Reserve Bank of India has issued new payments bank fraud protection rules that will take effect from January 1, 2027. These updated directions strengthen customer rights in cases of unauthorised electronic banking transactions. As a result, payments bank customers will gain clearer protections against digital payment fraud.
Key Changes in the New RBI Directions
The RBI has introduced precise definitions for critical terms under these directions. For example, terms like “Fraudulent EBT”, “Unauthorised EBT”, and “Third-party breach” now carry clear legal meanings. Additionally, the directions define negligence separately for both customers and payments banks, removing ambiguity in fraud complaints.
Under the new rules, payments banks must send instant SMS alerts for all transactions above ₹500. They must also operate 24×7 reporting channels for customers to flag fraud. Furthermore, banks must acknowledge complaints immediately, providing a complaint number and timestamp to the customer.
Importantly, the burden of proving customer liability now lies entirely with the payments bank. Therefore, customers no longer need to prove their innocence when disputing a fraudulent transaction. Banks must resolve domestic fraud complaints within 45 days and cross-border cases within 60 days.
Payments Bank Fraud Protection: Liability and Compensation
Customers will enjoy zero liability when fraud occurs due to bank negligence. Similarly, zero liability applies in third-party breach cases if the customer reports the fraud within five calendar days. However, if the customer’s own negligence caused the loss, they bear responsibility up to the point of reporting.
The RBI has also introduced a compensation scheme for small-value fraud losses. Eligible individuals who lose up to ₹50,000 due to fraud can receive 85% of their net loss, capped at ₹25,000. This benefit is available once per lifetime, and customers must report the fraud to both the bank and the National Cyber Crime Helpline (1930) within five days.
The RBI will fund 65% of eligible compensation amounts. Meanwhile, the customer’s bank and the beneficiary bank share the remaining 35% equally in domestic cases. Banks must process compensation applications within five calendar days of receiving a valid claim.
What This Means for Customers
These directions mark a significant shift toward stronger digital payment safety for payments bank users. Customers should save the National Cyber Crime Helpline number 1930 and report any fraud immediately. Additionally, they must keep their registered mobile number and email address updated with their bank to ensure timely alerts.
Source: RBI Notifications
