RBI raises concerns over potential cybersecurity risks posed by AI in finance sector

The Reserve Bank of India Governor Shaktikanta Das has raised concerns over the potential cybersecurity risks posed by the advent of artificial intelligence (AI) in the financial sector.

Speaking at the annual conference of the RBI ombudsman, Das emphasized that AI could lead to a significant increase in cybersecurity challenges, exposing consumers to identity theft, fraud, and unauthorized access to personal information.

He stressed the importance of financial institutions making substantial efforts to protect customer information and promptly address vulnerabilities.

Leveraging technology for fraud detection

Das highlighted the critical need to strengthen monitoring systems and leverage technology to detect potential frauds before they occur. He pointed out that technology, combined with behavioural analysis, can significantly aid in analyzing exceptions to consumer behaviour, such as unusual transaction times, patterns, and unauthorized beneficiary additions.

This approach can help in understanding and preventing frauds, ensuring consumer trust is maintained.

Enhancing customer service through data analytics

The RBI Governor also discussed the potential of data analytics in enhancing customer service. Regulated entities, being repositories of data on financial transactions and customer interactions, have a unique opportunity to use robust data analysis to proactively anticipate customer needs, address issues promptly, and streamline processes.

Das called on these entities to harness the power of data analytics to optimize operational efficiency and reinforce their commitment to providing exemplary customer service.

The importance of efficient grievance redressal

Das underscored the significance of an efficient grievance redressal mechanism as the litmus test for the functioning of any institution. He pointed out that fragmentation and inefficiency in grievance redressal can hinder the timely resolution of consumer complaints.

The RBI Governor praised the Reserve Bank-Integrated Ombudsman Scheme (RB-IOS, 2021) for its structural changes in operations, which have led to a significant improvement in the disposal rate and turnaround time for complaint closures.

Government and regulatory focus on AI

The development comes at a time when the central government has increased its focus on AI, both in terms of deployment and regulation. The Union Cabinet recently approved the IndiaAI Mission with an allocation of Rs 10,372 crore over the next five years.

Additionally, initiatives like IIT-Madras’ AI4Bharat and the National Payments Corporation of India's (NPCI) agreement with IISc, Bengaluru for joint AI research, along with regulatory advisories from the Ministry of Electronics and Information Technology (MeitY), highlight the growing emphasis on AI and its responsible use in India.