AI elevates cybersecurity risks multifold for financial institutions: RBI Guv Das

AI in financial institutions: Reserve Bank Governor Shaktikanta Das has said cybersecurity challenges can rise multi-fold due to the growth of artificial intelligence technology.

In his inaugural address at the Annual Conference of RBI Ombudsman in Mumbai, Das called upon financial institutions to align significant efforts for safeguarding customer information.

Data analytics can help regulated firms pre-empt customer needs, address issues quickly and streamline the overall process, the RBI Governor outlined. 

He noted how regulated entities become data repositories in terms of financial transactions, customer interactions, and operational activities.

"Within this extensive repository lies a unique opportunity to enhance customer service through robust data analysis," he said.

Deploying a data-driven approach will help in optimising operational efficiency, further robusting their resolve for exemplary customer service.

The rise in fraud during transactions calls for robusting monitoring systems, and using technology to recognise potential frauds before they happen.

"Maintaining a focus on root cause analysis of consumer grievances can result in preventing such complaints from coming up repeatedly. With the advent of AI, cybersecurity challenges can rise manifold," he said.

Cyberattack concerns can make consumers vulnerable to identity theft, fraud, and unauthorised access to personal information, eroding consumer trust.

"Financial Institutions must dedicate substantial efforts to protect customer information and ensure that vulnerabilities exposing customers to risk are promptly identified and addressed," the governor said.

The litmus test of any institution or entity working lies in how well its grievance redressal mechanism works, he further noted. 

A system which is fragmented or not efficient during grievance redressal mechanisms can affect consumer complaints resolution.

Which is why it is best to avoid several layers to the process, and make the resolution shorter. 

As per the Reserve Bank-Integrated Ombudsman Scheme (RB-IOS, 2021), several structural changes have come into the operations. About 2.34 lakh grievances were received during the first year of operations in 2022-23 under the RB-IOS scheme, which is succeeded by 2.68 lakh grievances in the present financial year of 2023-24 till now.

The disposal rate in both the years is about 98 per cent, while the median turnaround time for closure across all complaint categories significantly lessened to 33 days for 2022-23, compared to 57 days before the scheme was brought forth.

"Our analysis of the grievances received at the offices of the RBI ombudsman reveals certain gaps in the systems and procedures in the regulated entities. We have brought such deficiencies to the notice of the individual banks and NBFCs. Our effort is to work with the regulated entities and rectify such deficiencies," Das said.

While the Offices of Ombudsman are required to make more use of data analytics and technology for streamlining internal processes, regulated entities must also adopt a similar approach for upholding public trust.

There is also a need for making internal grievance systems further robust, which includes an internal ombudsman framework in the regulated entities, Das said.

(With PTI Inputs)