RBI warns banks against sole reliance on AI amid rising cyber threats

The Reserve Bank of India (RBI) has issued a warning to banks against relying solely on artificial intelligence (AI) and proposed new guidelines to manage associated risks, according to its recently released Financial Stability Report. Reported from Bengaluru, the central bank highlighted that AI-enabled cyber threats have emerged as the leading perceived risk for the country's financial infrastructure over the next year.

The RBI cautioned that cyber incidents could disrupt critical financial systems, leading to service outages, data loss, and payment system interruptions, which could ultimately erode public trust. The report noted that India remains highly exposed to these risks, experiencing a high volume of cyberattacks compared to other emerging market economies.

To address these challenges, the RBI has proposed guidelines for banks and financial service organizations to manage AI risks. Industry analysts emphasized that financial institutions must prepare for the next generation of AI-based threats.

Mandar Patil, Executive Vice President at the AI-native cybersecurity firm Cyble, stated that the growth of malicious activity on Indian networks is rising rapidly. He explained that cybercriminals are increasingly utilizing AI tools such as voice impersonations through voice synthesis, video deepfakes, smarter phishing emails, and highly complex ransomware attacks that are difficult to detect.

Patil urged financial service organizations utilizing AI for digital channel enhancements and customer service to make parallel investments in AI-based cybersecurity. He added that foundational cybersecurity components, including strong identity verification, real-time fraud detection, transaction monitoring, and employee training, must become a normal part of business operations.

The RBI's report also shared findings from a survey of major Indian banks and Non-Banking Financial Companies (NBFCs). The survey revealed that while financial institutions have established robust practices in cyber risk management—particularly in vulnerability assessment and penetration testing—cybersecurity training for employees still requires further strengthening. The report pointed out that human behavior remains one of the most exploited entry points for cyberattacks.

Rohit Mahajan, Founder and CEO of plutos ONE, also cautioned banks against over-dependence on AI. While acknowledging that AI will shape the future of banking, Mahajan warned that relying too heavily on it could restrict a bank's ability to perform essential functions. He advised banks to develop contingency plans to ensure they can maintain secure, AI-capable operations in line with the RBI's long-term vision.