Digital Banking Fraud and Regulatory Liability in India: Towards a Unified Consumer‑Centric Legal Framework

Abstract

Digital banking and financial technology (FinTech) have transformed India’s financial ecosystem by widening access, lowering transaction costs, and accelerating financial inclusion. At the same time, they have generated novel vulnerabilities, including phishing, SIM‑swap fraud, UPI manipulation, malware‑based intrusions, and emerging “digital arrest” scams that strain legacy liability doctrines and regulatory arrangements. This article offers a doctrinal and comparative analysis of digital banking fraud in India, examining statutory provisions, Reserve Bank of India (RBI) guidelines, judicial decisions, and the underdeveloped role of cyber insurance in loss allocation. It argues that India’s framework is fragmented, underenforced, and insufficiently consumer‑centric compared to regimes in the United Kingdom, the United States, and the European Union, where stricter institutional liability standards and reverse burdens of proof are increasingly used. Building on this analysis, the article proposes a unified legal regime for digital banking fraud that incorporates the statutory codification of RBI norms, reverse or strict liability for unauthorised transactions, integrated data protection and cybersecurity obligations, specialised dispute resolution mechanisms, and the structured use of cyber insurance. The study contributes to the literature on digital financial regulation in the Global South by reframing digital banking fraud as a systemic regulatory problem rather than an individual contractual dispute and by outlining a reform model that seeks to balance innovation, inclusion, and consumer protection.