The Reserve Bank of India (RBI) has issued revised customer protection norms for fraudulent electronic banking transactions in Urban and Rural Cooperative Banks, effective January 1, 2027.
Under the new framework, cooperative banks must strengthen cyber security measures by introducing robust fraud detection systems, providing 24×7 channels for reporting cyber frauds, and sending mandatory SMS alerts for electronic transactions above Rs 500. Banks will also be required to undertake continuous customer awareness initiatives on digital fraud risks.
A key feature of the revised directions is a compensation mechanism for small-value cyber fraud cases. Bona fide individual customers, including sole proprietors, who suffer eligible fraudulent losses of up to Rs 50,000 may receive compensation equal to 85% of their net loss, subject to a maximum of Rs 25,000.
To qualify, the fraud must be reported to both the bank and the National Cyber Crime Helpline (1930) or Cyber Crime Portal within five calendar days.
The RBI has also clarified that customers will have zero liability in cases arising from bank negligence, irrespective of when the fraud is reported. In cases involving third-party breaches, zero liability will apply if the fraudulent transaction is reported within five calendar days. Banks must resolve complaints within 45 days for domestic frauds and 60 days for cross-border cases.
The directions further mandate board-level monitoring of fraud complaints and stronger cyber-risk management systems.
