RBI Deputy Governor highlights cyber risks and banking resilience at FICCI-IBA

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RBI Deputy Governor highlights cyber risks and banking resilience at FICCI-IBA
Credit: © Reuters.

At the recent FICCI-IBA conference and FIBAC 2023 on Thursday, RBI Deputy Governor M. Rajeshwar Rao highlighted the importance of banks improving their customer grievance mechanisms in light of increasing cyber frauds and data breaches. He urged banks to adapt to the rapidly evolving banking-as-a-service (BaaS) landscape that includes a variety of non-bank players.

Rao identified five key pillars for a resilient financial system: strong governance and management, sound regulations, sufficient capital and liquidity, effective risk management and supervision, and robust crisis management plans. He warned that without efficient management, leveraged entities like banks could face catastrophic outcomes.

He drew attention to the growing prevalence of technology-induced frauds such as fraudulent apps, privacy intrusions, deepfakes, and deceptive practices known as 'Dark Patterns' used in digital mis-selling. He particularly spoke against these 'Dark Patterns' that lead consumers to high-cost credit, impacting trust retention and strengthening. Rao stressed that while banks are the primary drivers of India's economy, they must integrate technological innovations with care by conducting comprehensive risk assessments and developing prepared mitigation strategies.

Moreover, Rao criticized banks for their subpar customer grievance redressal efforts, insisting on a cultural revamp for better complaint resolution efficiency. He noted that despite being a service industry, banks have been disproportionately focusing on customer acquisition over grievance handling improvements. With banking technology advancing rapidly, customer service systems are not keeping pace.

Rao emphasized empathetic conduct towards vulnerable demographics including senior citizens and less tech-savvy individuals. He stated that RBI evaluations would emphasize this aspect more rigorously. Advocating for heightened empathy in banking practices aimed at vulnerable groups, Rao demanded a cultural shift in the banking industry's approach to customer care and inclusiveness. This change is being pursued by the RBI through increased regulatory interactions with the banking sector.

He predicted a transformation from traditional banking towards BaaS models requiring banks to engage in an ecosystem involving non-bank collaborations and provide highly personalized services. Highlighting cybersecurity as essential due to emerging threats from deceptive "Dark Patterns" and fraudulent apps, Rao suggested reassessing liquidity risk management frameworks to address these modern challenges effectively.

In both conferences on Thursday, Rao's message was clear: Banks need to improve their security measures and customer service approaches in response to the challenges brought about by the rapid advancement of technology. He stressed the need for banks to practice greater empathy towards vulnerable groups and advocated for customer protection via improved grievance redress systems that are aligned with technological progress. He also emphasized on monitoring Turnaround Time (TAT) for complaints resolution, indicating a shift towards enhanced customer care practices within the industry.

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