A surge in digital payments has brought convenience to millions of Indian users. It has also increased the risk of fraud.
The Reserve Bank of India, the country’s central banking authority, has proposed revised rules to limit customer liability in unauthorised electronic banking transactions.
The draft framework, released for public consultation on March 6, 2026, updates guidelines first issued in 2017.
Officials said the revision reflects rapid changes in banking technology and payment systems.
RBI unauthorised transactions rules and compensation mechanism
The proposed instructions include a compensation mechanism for small value fraudulent transactions, aimed at strengthening consumer protection.
The consultation paper outlines how liability will be determined in cases where customers report unauthorised activity.
The move comes as digital transactions continue to grow across platforms, increasing exposure to cyber fraud risks.
The government said it has been working with the Reserve Bank of India and other regulators to strengthen safeguards against such threats.
MuleHunter AI and IDPIC role in fraud detection India banking system
To address the misuse of mule accounts, which are used to transfer and conceal illicit funds, the Reserve Bank of India has deployed an artificial intelligence based system known as MuleHunter AI.
The tool uses machine learning techniques to identify suspicious account activity and has been implemented across 26 banks so far.
Authorities said the system is being expanded further to improve detection capabilities.
In parallel, the Indian Digital Payment Intelligence Corporation, a not for profit entity incorporated under the Companies Act, 2013 on October 16, 2025, has been established to strengthen fraud monitoring.
The corporation is tasked with detecting, preventing and analysing fraud in real time using technologies such as artificial intelligence, machine learning and big data analytics.
Banks have also been advised to deploy real time transaction monitoring systems and network analytics tools to identify patterns associated with fraudulent activity and mule networks.
Cybersecurity awareness campaigns and financial literacy initiatives India
Alongside regulatory and technological measures, authorities have expanded efforts to raise public awareness about financial fraud.
The Reserve Bank of India has been running the Centre for Financial Literacy project since 2017 to promote community based financial education. As of March 31, 2025, a total of 2,421 centres had been set up across the country.
The central bank also conducts Financial Literacy Week each year to promote safe banking practices among citizens.
Its public awareness campaign titled “RBI Kehta Hai” uses multiple media formats and languages to reach a wider audience.
The Securities and Exchange Board of India, the regulator for securities markets, runs the “SEBI vs SCAM” campaign to educate investors about fraud risks across television, print, radio and digital platforms.
It has also launched the Saa₹thi mobile application, which provides educational resources and investment related information aimed at protecting users.
The update on these measures was provided by Minister of State for Finance Pankaj Chaudhary in the Rajya Sabha.
The proposed rules and supporting initiatives indicate a broader push to align regulatory frameworks with the pace of digital financial activity.
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