RBI finalises digital banking fraud protection rules; introduces shadow reversal, extends relief to sole proprietors

The RBI has finalised its digital banking fraud protection framework, effective January 1, 2027, introducing a compensation mechanism where 65% of the payout is funded by the RBI, 10% by the victim's bank, and 10% by the beneficiary bank. The final rules broaden coverage to include sole proprietors and add cross-border fraud compensation, with the RBI bearing 65% and the customer's bank 35% in such cases. Key additions include a shadow reversal mechanism mandating provisional credit within five days for disputed credit card transactions, SMS alerts for all electronic transactions above Rs 500 (down from Rs 5,000), and resolution timelines of 45 days for domestic and 60 days for cross-border fraud complaints.