Page 57 - Banking Finance April 2025

ARTICLE

perienced 23,158 cybersecurity incidents in 2023. While this with sustainable practices. RBI, in Feb 2024, came with the
is significantly lower than the 1.22 lakh incidents reported draft Disclosure Framework on Climate-related Financial
during the height of the COVID-19 pandemic in 2021, it's Risks. However, assessing ESG risks and integrating them
still a cause for concern. The Reserve Bank of India (RBI) into lending decisions remains a challenge. More develop-
has emphasized the importance of cyber resilience, but ment is still to be seen in this area specially within the bank-
looking at the recent trends, we may conclude that the ing industry to identify, quantify, mitigate etc. for the Cli-
sector still struggles with gaps in preparedness. mate and ESG related risks.

To mitigate these risks, Indian banks must adopt advanced The Economic Survey 2023-24 emphasized the need for green
threat detection systems, multi-factor authentication, and financing and innovative approaches to address climate-re-
secure blockchain technologies for transactions. Collaborat- lated challenges. It noted that Indian banks are increasingly
ing with cybersecurity firms, regular specialised training for funding renewable energy projects and aligning with global
employees, creating cyber secure awareness in customers sustainability goals to mitigate long-term risks.
are crucial steps to enhance defence mechanisms.
Conclusion
Technological Disruptions
The Indian banking sector stands at crossroads. At one side,
The Indian banking sector is rapidly adopting technologies GoI is pressing hard for making global banks in India whereas
like artificial intelligence (AI), blockchain, digital wallets there are unprecedented challenges in the form of new age
cutting edge mobile banking products, Digital Loans, STP risks which will welcome year 2025. By embracing innova-
Liability and Asset products, Aadhaar based accounts etc. tion, strengthening governance, and prioritizing customer
For example, in 2023, digital payment transactions in India needs, Indian banks can navigate these risks effectively and
surpassed INR 4,500 trillion, highlighting the scale of tech- position themselves for long-term growth. Proactively ad-
nological integration. India's banking sector leads the adop- dressing these challenges is essential to building a resilient
tion and implementation of emerging AI use cases. This and sustainable banking ecosystem that supports India's
development will enable the country digital transactions to economic ambitions.
account for 71.7% of all payment transactions by 2025 and
see the digital banking platform market grow from US$ References
776.7 million in 2021 to about US$ 1.48 billion by 2028. In
1. RBI Annual Report, 2024.
the RBI Report on Currency and Finance for FY24, RBI also
2. Economic Times. "RBI Imposes Fines for Non-Compliance
highlighted various challenges and risks posed by this pro- with AML Norms," 2024.
cess of digital transformation.
3. IMF World Economic Outlook, 2023.
The digital transformation also needs reliance to be pre- 4. RBI Financial Stability Report, 2024.
cise, over-reliance on the fintech and 3rd party vendors. 5. McKinsey & Company. "Future of Risk Management in
Though, the micro services are provided by the 3rd party, Banking," 2024.
it's the bank whose reputation is on stake, if the operational
6. Accenture Banking Consumer Study, 2024.
resilience is affected duer to these digital disruptions.
7. Deloitte Insights. "Digital Banking in India: Challenges
and Opportunities," 2024.
Addressing these issues requires targeted investments in IT
8. CDP Global Climate Report, 2024.
infrastructure upgrades, strategic partnerships with fintech
companies, and comprehensive disaster recovery plans to 9. World Economic Forum. "Banking for a Sustainable Fu-
ensure continuity and reliability of services. ture," 2024.
10. Government of India. "Economic Survey 2023-24," 2024.
Climate and ESG Risks 11. https://sansad.in/getFile/loksabhaquestions/annex/
182/AU2082_3chrQm.pdf?source=pqals
Environmental, social, and governance (ESG) considerations
are gaining eyes of financial service regulators in worldwide 12. https://pib.gov.in/PressReleasePage.aspx?PRID=2037115
and India is not an exception. With initiatives like India's 13. https://bfsi.economictimes.indiatimes.com/news/bank-
commitment to achieving net-zero emissions by 2070, banks ing/indias-banking-sector-leading-in-implementation-
are under pressure to align their operations and portfolios of-ai-survey/89945758

BANKING FINANCE | APRIL | 2025 | 51