India’s banking system may be expanding its digital reach, but a growing volume of customer complaints and online fraud cases is testing its ability to protect users. The Reserve Bank of India has said these issues pose a growing challenge for banks, even as services improve across the sector.
In its latest report, Trend and Progress of Banking in India 2025, the RBI said customer protection, transparency and trust will remain central to its policy approach. The regulator noted that a banking system can stay strong only when banks treat customers fairly and resolve complaints without delay, confusion or failure.
Digital Fraud and Bank Accountability
The RBI pointed out that the sharp rise in digital transactions has also led to an increase in cyber and online fraud. To address this, the central bank has introduced a principle-based authentication framework for digital payments. It has also set up a dedicated internet domain and numbering series for regulated entities to help customers identify genuine communication. The RBI has stepped up coordination with the Ministry of Home Affairs and other agencies to tackle cybercrime.
Banks and financial institutions have received instructions to strengthen internal controls, appoint enough grievance officers and promote digital financial literacy among customers to reduce fraud risks.
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Steps to Clear Backlogs and Improve Systems
To improve access to grievance redressal, the RBI has reviewed the RB-IOS, 2021 scheme. The ombudsman system now covers state cooperative banks and central cooperative banks, which will allow customers in rural areas to raise complaints under the same framework.
The RBI has also proposed reforms to strengthen the role of the Internal Ombudsman. Under draft directions issued in October 2025, banks will follow a two-level complaint resolution process. Internal Ombudsmen may receive powers to award compensation and interact directly with customers to speed up decisions.
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To clear long-pending cases, the RBI will run a two-month special drive from January 1, 2026, which focuses on complaints pending with the Ombudsman for more than one month.
The central bank is also developing the Complaint Management System 2.0 to improve complaint tracking and provide clearer updates from filing to closure.
In addition, the RBI is planning new rules on advertising and the sale of financial products and uniform guidelines for recovery agents to prevent mis-selling and improper recovery practices. It is also reviewing the 2017 framework on customer liability in unauthorised digital transactions to address new fraud patterns.
