# Online frauds: Bank errors cause losses despite customer alertness

> RBI rules clarify when banks must refund customers after online frauds.
- Title: Online frauds: Bank errors cause losses despite customer…
- Summary: RBI rules clarify when banks must refund customers after online frauds. Banks must refund customers for unauthorized transactions caused by their negligence…
- Keywords: rbi, bank liability, customer compensation, online fraud, unauthorized transactions, fraud detection, bank negligence, news, india, Online, frauds, Bank
- Source: mint — https://livemint.com/money/personal-finance/online-frauds-you-were-alert-but-lost-money-due-to-banks-error-key-rbi-rules-on-bank-liability-customer-compensation-11792657831269.html
- Author: Sheetal Goel
- Published: 2026-10-22T09:25:54+00:00
- Read time: 1 min
- Topics: rbi, bank liability, customer compensation, online fraud, unauthorized transactions, fraud detection, bank negligence, news, india
## RBI rules on bank liability
RBI rules specify when banks must refund customers and how banks' liability is determined for online fraud cases.
## What constitutes bank negligence?
Inadequate fraud detection, deficient authentication, ignored alerts, or data breaches can constitute bank negligence where they contribute to unauthorized debits.
## Two types of bank negligence
Not following RBI rules, such as releasing payments without two-factor authentication, or acting without customer instruction, like issuing loans or cards the customer never requested.
## Current RBI rules coverage
Customers have zero liability if fraud arises from bank negligence or third-party breaches reported within three working days.
## New RBI rules effective 2027
The 2026 directions take effect on January 1, 2027, widening reporting windows and shifting the burden of proof to banks.
## Resolution timelines
Resolution deadlines will be 45 days for domestic and 60 days for cross-border cases to address fraud claims.
## Customer compensation rules
Compensation for small-value frauds will be 85% of the loss or ₹25,000, whichever is lower, with no monetary cap on refunds for bank negligence.
## Steps after fraud discovery
Block compromised cards, report via bank app or helpline, call cybercrime helpline at 1930, and file police complaints to prevent further losses.
## Data leak compensation
Data leaks do not automatically entitle customers to compensation; they must act to prevent further losses using exposed data.
## Key takeaway

Banks must refund customers for unauthorized transactions caused by their negligence, with no liability cap on refunds.