RBI expands customer-liability framework for fraudulent electronic banking transactions effective 1 January 2027
Banks must expand fraud-liability coverage, shorten complaint timelines and run a small-value compensation mechanism from 1 January 2027
Change
On 24 June 2026, the Reserve Bank of India (RBI) issued final Responsible Business Conduct Amendment Directions requiring banks to extend the customer-liability framework to additional categories of fraudulent electronic banking transactions, shorten complaint-processing timelines, and introduce a compensation mechanism for small-value fraudulent transactions, effective 1 January 2027.
Why it matters
The Directions extend customer-liability limits beyond unauthorised transactions to other categories of fraudulent electronic banking transactions, requiring updates to liability rules and transaction-screening criteria. Banks must shorten complaint-processing timelines for fraudulent electronic banking transactions and establish a compensation mechanism, with payment processes and accounting provisions, for small-value fraudulent transactions before the effective date. The Directions bind commercial banks, small finance banks, payments banks, local area banks, regional rural banks, urban co-operative banks and rural co-operative banks.
Implications
- — Bank policy and conduct teams across all covered bank classes must extend customer-liability coverage beyond unauthorised transactions to the additional categories of fraudulent electronic banking transactions, updating liability rules and screening criteria, by 1 January 2027 — liability frameworks limited to unauthorised transactions do not conform to the Amendment Directions.
- — Bank customer-complaints and operations teams must shorten complaint-processing timelines for fraudulent electronic banking transactions to meet the revised limits by 1 January 2027 — complaint-handling that retains the prior timelines is non-compliant with the Amendment Directions.
- — Bank operations and finance teams must establish a compensation mechanism, with the payment process and accounting provisions, for small-value fraudulent electronic banking transactions by 1 January 2027 — the absence of a working small-value compensation process is non-compliant with the Amendment Directions.
Who is affected
- — Bank policy and conduct teams across commercial, small finance, payments, local area, regional rural, urban co-operative and rural co-operative banks
- — Bank customer-complaints and operations teams
- — Bank operations and finance teams
What to watch
- — 1 January 2027: the Amendment Directions take effect — expanded liability coverage, shortened complaint timelines and the small-value compensation mechanism apply.