RBI proposes ₹25,000 compensation for small-value frauds:Draft guidelines planned on loan recovery, customer liability in online banking malpractice

Reserve Bank of India (RBI) Governor Sanjay Malhotra on Friday, February 6, announced a new framework to compensate customers for losses arising from small-value fraudulent digital transactions, with compensation capped at ₹25,000. The announcement was made while unveiling the final bi-monthly monetary policy of the current financial year. Discussion paper planned to strengthen digital payment safety Malhotra said the RBI will publish a discussion paper outlining potential measures to enhance the safety and security of digital payments. Such measures may include lagged credits and additional authentication for specific classes of users, such as senior citizens, Malhotra said. Three draft guidelines to bolster customer protection

As part of a broader push to strengthen customer protection, the RBI will issue three draft guidelines for public consultation. These will cover mis-selling of financial products, recovery of loans and engagement of recovery agents, and limits on customer liability for unauthorised electronic banking transactions. It is also proposed to introduce a framework to compensate customers up to ₹25,000 for losses incurred in small-value fraudulent transactions,” Malhotra said.
The existing instructions on limiting customer liability for unauthorised electronic banking transactions were issued in 2017 and define scenarios and timelines for zero or limited liability. Malhotra said these norms have been reviewed in view of the rapid adoption of technology across banking and payment systems. Revised draft instructions, including the proposed compensation framework, will be issued shortly for public consultation. Tighter norms planned to curb mis-selling Flagging concerns over mis-selling, Malhotra said improper sale of financial products by regulated entities has serious consequences for both customers and institutions. “There is a need to ensure that third-party products and services sold at bank counters are suitable for customer needs and aligned with individual risk appetite,” he said. Accordingly, the RBI has decided to issue comprehensive instructions to regulated entities on advertising, marketing and sales practices for financial products and services. Draft guidelines will be released soon for public feedback. Recovery agent rules to be harmonised Malhotra noted that different conduct-related instructions currently apply to various categories of regulated entities in relation to loan recovery and engagement of recovery agents. The RBI has decided to review and harmonise all such existing instructions. Draft guidelines on this front will also be issued for public consultation. Mission SAKSHAM to strengthen urban cooperative banks Announcing Mission SAKSHAM (Sahakari Bank Kshamta Nirman), Malhotra said the initiative will focus on capacity-building for urban cooperative banks (UCBs). Emphasising that primary (urban) cooperative banks play a vital role in promoting financial inclusion and serving the unbanked, he said their next phase of growth would depend on stronger skills, technical capabilities and operational resilience. Mission SAKSHAM will be a sector-wide training and certification framework, covering about 1.4 lakh participants across functions. Capacity-building will be delivered through a mix of physical training programmes and a scalable digital learning platform. The RBI will endeavour to conduct training sessions close to participating UCBs and deliver content in regional languages wherever feasible. The initiative will be implemented in partnership with UCB umbrella organisations and national and state federations.