RBI Building AI System To Flag Risky Online Payments

With an eye on curbing online frauds, the Reserve Bank of India is developing an AI-powered fraud detection platform to flag “risky” online transactions.

“There is a new offering in the experimental stage. We are making software which will caution users against risky transactions. We are working on this,” RBI governor Sanjay Malhotra said during a press briefing after the monetary policy committee (MPC) meeting yesterday.

Deputy governor T Rabi Sankar explained that the under-development ‘Digital Payments Intelligence System’ is being developed by the central bank’s innovation hub. He added that the new platform will be run by a separate entity, and will collect data from various sources (existing banking data, telcos and geography) to trace mule accounts and flag risks to both customers and banks.

The platform will then leave the onus on the end customer to decide whether to proceed ahead with the payment, added Sankar. Answering media queries, the RBI deputy governor said that the new system will “further lower” the number of online frauds.

This comes a year after reports first surfaced that the RBI was looking to develop an AI-enabled system to alert individuals about real-time financial fraud.

RBI Cracks The Whip On Fraudsters

Data security and transaction frauds have emerged as a key issue for the RBI as Indians increasingly adopt digital payments for everyday transactions. As a result, financial frauds and cyber frauds are on the rise in the country. Indians lost INR 107.21 Cr to cyber frauds in the first nine months of FY25.

To curb these challenges, the RBI, last month, proposed new norms which will allow digital payment providers to implement additional risk-based checks beyond the mandatory two-factor authentication for certain transactions.

In recent months, the RBI has also launched an exclusive internet domain, ‘bank.in’, for Indian banks to curb frauds and directed financial institutions to integrate the telecom department’s financial fraud risk indicator (FRI) into their systems.

Alongside, the central bank has opted for AI to rein in these new-age threats. In December 2024, the central bank rolled out an AI-powered model, called MuleHunter.AI, to detect mule bank accounts and curb digital frauds.

In August this year, an RBI panel also pitched for a comprehensive AI policy framework for the financial industry to fuel innovation and mitigate risks. Prior to that, the central bank was also examining AI models for “predictive” analysis of the markets to detect early signs of asset bubbles and market disruptions, and “stress test” banks.

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