RBI Guv Das states AI increases cybersecurity challenges for financial institutions

New Delhi: Reserve Bank Governor Shaktikanta Das said on Friday that financial institutions should make significant efforts to protect client information as artificial intelligence (AI) presents a multitude of cybersecurity challenges. In his debut speech at the Annual Conference of RBI Ombudsman here, the governor stated that regulated firms served as repositories of data on financial transactions, customer contacts, and operational activities.

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

By harnessing the power of data analytics, Das said regulated entities can proactively anticipate customer needs, address issues promptly, and streamline processes. A data-driven approach would not only optimise operational efficiency but also reinforce the commitment to providing exemplary customer service.

He noted that with the rise in fraudulent transactions, it is critical to strengthen monitoring systems and use technology to detect potential frauds before they materialise.

"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.

Cybersecurity challenges can expose consumers to identity theft, fraud, and unauthorised access to personal information, which can affect 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.

He further said the litmus test of the working of any institution or entity is the efficacy of its grievance redressal mechanism.

Fragmentation and inefficiency in grievance redressal mechanisms can hinder the timely resolution of consumer complaints, he said, adding that multiple layers and lengthy resolution processes should, therefore, be avoided.

The Reserve Bank-Integrated Ombudsman Scheme (RB-IOS, 2021) has brought in several structural changes in the operations of the Ombudsman scheme. Under the RB-IOS scheme, 2.34 lakh grievances were received during the first full year of its operation (2022-23), followed by 2.68 lakh grievances in the current financial year (2023-24) so far.

The disposal rate in both years has been about 98 per cent. The average turnaround time for closure across all categories of complaints has come down to 33 days for 2022-23 from 57 days prior to the introduction of the new scheme.

"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.

He stated that while the Offices of Ombudsman need to intensify data analytics and use of technology for streamlining the internal processes, the adoption of a similar approach by the regulated entities is crucial for upholding public trust.

There is also a need for further strengthening the internal grievance redress systems, including the internal ombudsman framework in the regulated entities, the governor said.

With PTI inputs