Policy Watch
Cyber Fraudsters are Increasingly Targeting Financial Institutions Instead of End Users Globally – RBI Report
The Reserve Bank of India (RBI) has cautioned about the rising cybersecurity risks and potential frauds due to increased digitisation. The RBI’s latest report highlights the need for robust cybersecurity measures to protect financial stability and customer data, while also acknowledging the benefits of digitisation in terms of innovation and expanded access to financial services.
Mumbai: The Reserve Bank of India (RBI) has issued a stern warning about the cybersecurity threats and potential frauds that have emerged due to the rapid digitisation of the financial sector. In its latest report on Currency and Finance for 2023-24, the RBI highlighted the dual-edged nature of digitisation, emphasizing both its benefits and its inherent risks.
The report outlines several risks associated with the increasing digitisation in the banking sector. These include:
1. Complex Financial Products: The advent of digitisation has led to the creation of more complex financial products, which can be challenging for both consumers and financial institutions to manage.
2. Greater Interconnectedness: Increased interconnectedness among financial systems enhances the risk of cybersecurity threats and data breaches.
3. Cybersecurity Threats: The report underscores the growing risk of cyber attacks, which have the potential to disrupt financial stability and undermine consumer confidence.
4. Financial Frauds: The ease of conducting transactions digitally has also opened up new avenues for financial frauds.
5. Customer Protection: Ensuring the protection of customer data has become increasingly difficult, posing significant challenges to financial institutions.
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Survey Insights
A survey conducted in March 2024, covering 25 scheduled commercial banks and 68 non-banking financial companies, revealed that many respondents are concerned about the implications of digitisation on financial stability. They cited cybersecurity threats, data breaches, and the rapid dissemination of information and rumors as key issues. Furthermore, the survey indicated that cyber fraudsters are increasingly targeting financial institutions rather than individual users globally.
RBI’s Measures
In response to these challenges, the RBI has issued new cybersecurity guidelines for banks. These guidelines call for the implementation of board-approved cybersecurity policies that are distinct from the broader IT policies of the institutions. Key elements of these policies include continuous surveillance, protection of customer information, and sharing of cybersecurity incident information with the RBI.
The RBI also emphasized the need for increased cybersecurity awareness among all stakeholders, including customers, partners, and senior management. The guidelines urge banks to take proactive measures to enhance their cybersecurity frameworks and prepare for potential adverse incidents.
Benefits of Digitisation
Despite the risks, the RBI acknowledges the numerous benefits of digitisation. These include innovation, expanded access to financial services, enhanced competition, and reduced intermediation costs. The report stresses the importance of addressing the cybersecurity challenges to fully realize the potential of financial digitisation.
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