As digital payments continue to grow rapidly across India, cases of online fraud have also increased at an alarming pace. Among these, OTP-related scams have emerged as one of the most common threats, where unsuspecting users unknowingly share their One-Time Passwords and lose money within minutes. In a major relief for such victims, the Reserve Bank of India (RBI) has announced a new compensation mechanism that offers financial protection even in cases where customers accidentally shared their OTP.
Under the newly announced framework, customers affected by small digital frauds involving amounts below ₹50,000 will be eligible to receive compensation of up to ₹25,000. This relief applies even if the fraud occurred due to inadvertent sharing of OTPs, provided there is no malicious intent on the customer’s part.
RBI Governor Sanjay Malhotra explained that nearly 65% of reported digital fraud cases involve amounts under ₹50,000. Keeping this in mind, the central bank has designed a system that prioritises relief for the most vulnerable users, including senior citizens, first-time digital users, and individuals unfamiliar with online payment risks.
The compensation structure has been clearly defined:
If a customer suffers a loss of ₹20,000, they will receive 85% of the amount, which equals ₹17,000
If the loss is ₹50,000, the maximum compensation payable will be ₹25,000
The remaining 15% of the loss will be shared between the bank and the customer
The payout will be funded through the Depositor Education and Awareness (DEA) Fund, which is managed by the RBI to promote financial literacy and customer protection.
To ensure responsible use of the scheme, RBI has clarified that this compensation benefit will be available only once in a lifetime to each customer. This limitation has been introduced to discourage negligence and prevent repeated misuse of digital payment systems.
Additionally, the central bank has made it clear that compensation will not be provided in cases involving deliberate negligence, fraud, or collusion by the customer.
Until now, victims of OTP scams had very limited chances of recovering their lost money. In many cases, banks denied liability citing customer negligence, leaving victims financially and emotionally distressed. RBI’s new rule marks a significant shift in approach by acknowledging the realities of digital fraud and offering a safety net for genuine mistakes.
The move is expected to boost public confidence in digital payments, especially among senior citizens and users from semi-urban and rural areas who are still adapting to online banking systems.
Experts believe this initiative will encourage banks to strengthen fraud detection systems while also reminding customers to remain cautious. RBI has reiterated that OTPs, PINs, and passwords should never be shared with anyone, regardless of claims made over calls or messages.
By balancing customer responsibility with institutional support, RBI’s latest guideline aims to create a more secure and inclusive digital payment ecosystem in India.
