I4C warns banks and NBFCs against AI-based hacking risks

Central cyber security agency I4C has issued a strict warning to all banks, Non-Banking Financial Companies (NBFCs), and fintech companies in the country to remain vigilant against cyber attacks carried out through Artificial Intelligence (AI). The agency revealed that hackers are now using AI technology to conduct fraudulent transactions extremely quickly, i.e., at machine speed, causing massive losses to financial institutions.

According to a report by The Economic Times, I4C has specifically drawn attention to incidents of unauthorized fund transfers worth crores of rupees. The agency stated that hackers are using AI-powered tools to identify flaws in security systems and are committing large-scale financial fraud in a very short span of time. These types of attacks are faster and more complex than traditional hacking, making them difficult to detect and prevent.

Keeping these serious risks in mind, I4C has urged all financial institutions to strengthen and upgrade their API (Application Programming Interface) security. API allows two different software programs to communicate with each other, and if there is any vulnerability in this, hackers can exploit it to penetrate the system and steal money from customers' accounts.

Along with these strict security measures, I4C has also instructed that strictness be brought to the reporting process. The agency directed that in case of any cyber incident or security breach, it is mandatory for financial institutions to inform CERT-In (Indian Computer Emergency Response Team) and the Reserve Bank of India (RBI) within 6 hours of the incident. The purpose of this deadline is to ensure that timely information can alert other banks and institutions and prevent further loss.

I4C clarified that these AI-driven attacks could jeopardize not only individual accounts but the stability of the entire financial ecosystem. Fintech companies, which rely on digital payments and loan applications, may be particularly vulnerable to such attacks. Therefore, it is essential for all these institutions to review and modernize their cyber security protocols.

This warning comes at a time when the reach of digital banking has expanded and cyber criminals are employing smarter technology. The objective of the instructions issued by I4C is to maintain transparency and security in financial transactions, ensuring the safety of common citizens' money and preserving trust in the banking system.

Institutions will now have to focus on how they can establish AI-based monitoring systems that can identify suspicious transactions in real-time and block them immediately. According to I4C, if timely measures are not taken, these frauds occurring at machine speed will remain a major challenge for the financial sector.