RBI’s Cyber Fraud Relief Plan Draws Criticism for Focusing on Compensation Over Prevention
BK Singh
The Reserve Bank of India (RBI) has proposed a special relief mechanism to compensate victims of cyber fraud, offering reimbursement of up to ₹25,000 in cases involving small-value digital scams.
While the move is aimed at providing immediate relief to affected customers, it has also sparked criticism from experts who argue that the focus should instead be on preventing such crimes at the source.
Under the proposal, victims of cyber fraud—including those who inadvertently share their One-Time Passwords (OTPs) with fraudsters—will be eligible to receive 85 per cent of the defrauded amount, capped at ₹25,000, without any detailed questioning.
Of the remaining loss, 15 per cent will be borne by the customer, another 15 per cent by the concerned bank, while the bulk 70 per cent will be funded by the RBI through its Depositor Education and Awareness Fund, which has a corpus of around ₹85,000 crore.
The facility, however, will be available only once per individual.
The central bank plans to put in place a system to ensure that no customer avails of the benefit more than once. RBI officials noted that currently, nearly 65 per cent of reported cyber fraud cases involve amounts of up to ₹50,000, making small-ticket fraud a major concern.
In addition to the compensation framework, the RBI has indicated that it is considering stricter safeguards for digital payments.
These may include delayed execution of certain transactions, enhanced verification for senior citizens and other vulnerable categories of customers, and tighter rules to limit customer liability in online fraud cases.
Despite these measures, the proposal has drawn sharp reactions. Retired government officer Prashant Bhatnagar questioned the broader approach, saying the announcement reflects a misplaced priority.
“Instead of treating the prevention of cyber fraud as an urgent national priority, the authorities have come up with a novel idea of paying compensation,” he said.
“Unless cybercriminals realise that the law will catch up with them swiftly and decisively, they will continue to dupe gullible account holders with impunity.”
Bhatnagar stressed that the government must now place greater emphasis on strengthening enforcement, speeding up investigations, and ensuring strict punishment for offenders, rather than relying primarily on post-fraud relief.
The RBI also announced that it will soon release three draft regulations aimed at strengthening customer protection.
These will cover mis-selling of financial products, conduct of loan recovery agents, and rules governing customer responsibility in online transactions.
Separate, stricter guidelines for recovery agents and for the marketing and sale of third-party products by banks and non-banking financial companies are also in the pipeline.
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