Evaluating Bank Strength in the Digital Age

Banks have traditionally been assessed on capital, liquidity, asset quality, and profitability. With increasing digitalization, protection against cyber threats is now equally important. Banks operate through digital platforms, networks, and partnerships, increasing risk exposure.

Cyber Risk as a Banking Risk

• Nature of Cyber Risk:
  • Cyberattacks are becoming more organized and difficult to detect.
  • Common threats include ransomware, phishing, and denial-of-service attacks.
• Role of Artificial Intelligence:
  • Banks use AI for anomaly detection and fraud monitoring.
  • Criminals use AI for phishing and personalized fraud attempts.
• System-wide Response: Cyber risk should be integrated into risk management and controls and assessed like other banking risks.

Beyond Prevention

• Early Detection and Recovery:
  • Banks should have plans for early detection and quick recovery.
  • Critical operations, systems, and third-party dependencies must be identified.
• Communication: Timely and accurate communication with customers and regulators is crucial.

The Boardroom Dimension

• Boards need to ensure informed oversight without being overloaded with technical details.
• Cybersecurity should be part of risk appetite and strategy.

The Customer Interface

• Incidents often occur at the customer interface due to misinformation or lack of awareness.
• Banks should enhance customer-facing controls and provide clear communication.

Staff Behavior

• Technology investment should be matched by staff training and cyber hygiene.

Regulation and Collective Defense

• Regulatory frameworks should be proportionate, risk-based, and responsive.
• India has an institutional architecture for coordinated response, including CERT-In and CSIRT-Fin.

Building Security into Digital Growth

• India's digital financial ecosystem has achieved remarkable scale.
• Safety must be built into products and platforms from the design stage.
• New challenges include open banking, digital currencies, and AI-enabled attacks.

The views expressed are personal and do not necessarily reflect the opinion of Business Standard.