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Relevance: GS Paper III — Indian Economy (Banking, Cyber Security); GS Paper II — E-Governance Source: RBI / Business Standard, June 2026

1 · What happened

The Reserve Bank of India (RBI) has introduced new rules to compensate victims of small digital banking frauds. This safety net will apply to everyday digital payments—called Electronic Banking Transactions (EBTs)—starting 1 January 2027.

In the same week, the RBI also updated its rules on how banks should calculate risks when trading in foreign exchange (forex), which will start in April 2027. Also, the RBI Governor hinted that interest rates won’t be increased anytime soon, which brought immediate relief to the bond market.

2 · How the Fraud Compensation Works

An Electronic Banking Transaction (EBT) includes things you use daily: UPI, internet and mobile banking, ATM withdrawals, and card swipes. If an innocent customer gets scammed, this new framework guarantees a quick, partial refund. The financial burden is shared between the RBI and the banks.

Coverage
Who & What is Covered
It applies to regular commercial banks starting 1 January 2027. (Specialized banks like Small Finance or Payment banks have separate rules).
Relief
The 85% or ₹25,000 Rule
If you lose up to ₹50,000, you get back 85% of the money or ₹25,000 (whichever is less). You can only use this safety net once in your lifetime.
Mechanism
Who Pays the Refund?
For local frauds: RBI pays 65%, your bank pays 10%, and the scammer’s bank pays 10%. For international frauds, the scammer’s bank is abroad, so RBI pays 65% and your bank pays 20%.
Trigger
The 5-Day Deadline
You must report the fraud within 5 days by calling 1930 or using the Cyber Crime Portal. Note: If you willingly shared your OTP, you won’t get a refund.

  • Catching careless banks: The bank where the stolen money lands (the beneficiary bank) now has to pay 10% of the refund. This forces banks to stop fraudsters from opening fake “mule” accounts.
  • Simpler Forex Rules: Banks no longer have to separate local and international foreign exchange risks. This makes business easier and aligns India with global banking standards set by the Basel Committee.
  • Market Relief: Because the RBI Governor hinted that loan interest rates will not be raised right now, bond yields (interest rates on government debt) dropped to a three-month low, showing market confidence.

UPSC Value Box (Simple Terms)
Section 35A (Banking Regulation Act) The specific law that gives RBI the power to issue these strict orders to banks.
1930 Helpline & Cyber Portal Run by the Home Ministry. It is directly linked to banks so they can instantly freeze stolen money before the scammer withdraws it.
Beneficiary Bank The bank account where the stolen money first arrives. Making them pay forces them to verify customers better.
Mule Account A bank account opened in an innocent person’s name, but secretly used by criminals to hide stolen money.
Basel Committee The global authority that sets the gold standard for how banks should safely manage their risks and money.
Basis Point (bps) A very small measure used in finance. 100 bps equals exactly 1%.
Neutral Policy Stance When the RBI decides to just watch the economy; they are not rushing to increase or decrease interest rates.

MCQ Practice Question
Q. With reference to the RBI’s new Digital Fraud Compensation Directions (2026), consider the following statements:

  1. For a fraudulent electronic transaction involving a loss up to ₹50,000, the victim can get back 85% of the loss or ₹25,000, whichever is less.
  2. A customer can use this compensation facility multiple times in their life, as long as they report the fraud within five days.
  3. In domestic frauds, the refund amount is shared between the RBI, the victim’s bank, and the scammer’s (beneficiary) bank.

Which of the statements given above is/are correct?
(a) 1 and 2 only    (b) 2 and 3 only    (c) 1 and 3 only    (d) 1, 2 and 3

Answer: (c) 1 and 3 only

  • Statement 1 is Correct: The maximum refund you can get is 85% of your lost money, capped at a maximum of ₹25,000.
  • Statement 2 is Incorrect (The Trap): You can only use this specific RBI safety net once in your lifetime. The 5-day rule is just the strict deadline to report it.
  • Statement 3 is Correct: To make banks more responsible, RBI pays 65%, your bank pays 10%, and the scammer’s bank pays the remaining 10% for local frauds.
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