AI Cyber Attacks Emerge as Biggest Threat to Indian Banking: RBI

The facing the Indian banking system, according to the June 2026 edition of its Financial Stability Report (FSR). The central bank's latest assessment highlights that while banks and financial institutions have strengthened assessment and penetration testing of critical systems. However, AI , AI-enabled cyber threats can increase the speed, scale and sophistication of attacks targeting financial infrastructure. Survey responses showed that most financial institutions are still in the developing or intermediate stages of integrating AI-specific threat preparedness into their existing . Regulatory reporting processes and board-level reporting of major cyber incidents have also matured.

However, the report identified employee , preserve digital evidence and support regulatory and law enforcement investigations following sophisticated cyber incidents.

The survey further revealed that around 67 percent of respondents increased IT and cybersecurity staffing between March 2025 and March 2026.

Additionally, 71 percent reported higher cybersecurity spending as a share of overall IT expenditure during the last three financial years.

Third-Party Risk Emerges as Second Biggest Concern

Beyond AI Cyber Attacks, the RBI ranked and vulnerability assessments. Three-fourths of respondents also reported moderate to very high dependence on third-party technology providers for critical applications.

According to the RBI, a major cyber incident affecting a common service provider could rapidly disrupt multiple regulated entities and create broader financial stability risks.

Growing Digital Transactions Increase Cyber Risk

The report noted that cyber .

Although 98 percent of respondents rated their current cyber risk exposure as very low to moderate and reported minimal disruption to customer services during 2025-26, nearly one-third indicated that cyber risk had increased compared with the previous year.

The RBI also observed that geopolitical uncertainty is contributing to the evolving threat landscape, with 42 percent of surveyed institutions believing it has increased the likelihood of cyberattacks.

Financial Sector Cybersecurity Strategy Advances

The report said the proposed Financial Sector Cybersecurity Strategy is at an advanced stage of formulation. Developed by an Inter-Ministerial Group under the Financial Stability and Development Council, the strategy aims to establish governance frameworks, regulatory harmonisation and implementation timelines across the financial sector.

The RBI said the strategy will address cybersecurity risks associated with artificial intelligence, cloud computing, quantum technologies, third-party dependencies, consumer protection and cross-sector critical infrastructure, strengthening the resilience of India's financial system against emerging cyber threats.