RBI Explores AI-Based Monitoring to Strengthen Fraud Controls: Report
The central bank is examining AI-led surveillance across ATMs and branches, as banks weigh gains in fraud detection against privacy and operational challenges.
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India’s banking regulator is exploring the use of artificial intelligence-based monitoring systems across automated teller machines (ATMs) and branch networks, as it looks to strengthen fraud detection in high-risk locations, The Economic Times reported, citing people aware of the matter.
The Reserve Bank of India (RBI) has sought feedback from banks on deploying tools such as facial recognition and other AI-driven surveillance systems, particularly in areas identified as fraud hotspots, the report said.
The move comes as lenders grapple with rising transaction volumes and increasingly complex fraud patterns, prompting a shift toward embedding technology deeper into operational controls.
Banking executives said such systems could improve detection by enabling real-time identification of suspicious activity and faster intervention. However, they cautioned that large-scale deployment would require significant investment in infrastructure and integration with existing systems.
Upgrading ATM networks, aligning with core banking platforms, and ensuring compatibility with national payments infrastructure are among the key challenges flagged by industry participants.
Privacy concerns are also central to the discussion.
The use of facial recognition and biometric data raises questions around compliance with India’s data protection framework, including safeguards on data storage, access, and usage. Any rollout would need to align with regulatory requirements and address risks linked to misuse or overreach.
RBI has been tightening oversight of digital transactions, including proposals to strengthen customer protection and compensation mechanisms for unauthorized activity, signaling a broader effort to reinforce trust in the financial system.
Industry executives said the effectiveness of AI-led fraud controls will depend on execution as much as technology, particularly in ensuring systems are interoperable, auditable, and scalable across diverse banking environments.
RBI is expected to take a view after reviewing feedback from lenders, with any potential rollout likely to be phased.
