India's RBI tightens cyber oversight for lenders amid rising hack risks

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RBI tightens cyber oversight

Highlights

Reserve Bank of India demands banks provide evidence of cybersecurity compliance and strengthen oversight of APIs linking banks with non-bank lenders and fintechs.
Recent incidents include State Bank of India's data leak affecting 3,900 customers and two Mumbai non-bank lenders losing about $2 million through compromised ICICI Bank APIs on Oct. 8–9.
India's CERT-In warns hackers are exploiting banks' API credentials, often with AI tools, highlighting rising operational risks from weak interbank and vendor connections.

Regulator seeks proof on cyber controls

As reported by Reuters, the Reserve Bank of India has used a series of recent meetings with banks to warn about rising cyberattacks and to seek proof that lenders are complying with existing cybersecurity directives.

The regulator is also asking banks to examine weaknesses in application programming interfaces, the software links that connect banks with non-bank lenders and fintech companies. One person familiar with regulatory thinking says hackers view smaller lenders, non-bank lenders and their third-party vendors as softer targets.

A second source, a consultant working with top banks, says the RBI has already issued directions on managing cybersecurity risk, but implementation is lagging. That gap is prompting the central bank to press lenders for stronger execution and more detail on their preparedness for AI-related risks.

Recent breaches sharpen pressure on lenders

The tighter oversight comes as India sees a rise in cyber incidents in recent weeks. At State Bank of India, the country's largest lender, data belonging to 3,900 customers was leaked, and the bank says it is investigating and has not yet identified the vulnerability.

In another case, two Mumbai-based non-bank lenders lose about $2 million in more than 700 unauthorised instant transfers from accounts held with ICICI Bank on Oct. 8 and 9, according to a police complaint reviewed by Reuters. The complaint says hackers compromised the API link used to send loan disbursal instructions to ICICI Bank.

India's cyber agency CERT-In says in an Oct. 9 advisory that hackers are stealing banks' API credentials to move money out of lenders' own systems, possibly with AI-assisted tools. The warning underscores growing concern that weak links between banks, non-bank lenders and vendors are becoming a broader operational risk for the financial sector.

In our earlier report on the Bank of England’s push for “bare metal” recovery, we explained why supervisors want banks to plan for operating critical services even if primary systems are compromised. The article highlighted concerns that AI is making cyberattacks larger and more complex, prompting regulators to demand stronger end-to-end resilience and clearer recovery options across the financial system.

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