Indian banks are ramping up cybersecurity spending as artificial intelligence-fueled cyber threats grow more sophisticated. As per the Digital Threat Report 2025-26 for the Banking, Financial Services and Insurance (BFSI) sector, six out of seven cyber threats identified by the report in the previous year have become operational, forcing banks to shore up their cyber defenses.
“The threat landscape is evolving with bad actors using AI, impersonation, and payment process orchestration to mimic legitimate customer behavior. BFSI players are adopting advanced security technologies and countermeasures such as AI-driven fraud detection and prevention, zero-trust architecture, micro segmentation, and enhanced cyber defenses,” said the report.
With security being increasingly prioritized as an operating imperative over technology spending, banks are also investing more in secure digital lending platforms, Unified Payment Interface (UPI) services, cloud, and AI applications.
PNB, for instance, has set aside about 20% of its FY27 technology budget or ₹7-8 billion for cybersecurity. This is more than double the spending made in the previous fiscal. “We can always increase our cybersecurity budget if the need arises,” said the bank.
The Reserve Bank of India (RBI) has also been focusing on cybersecurity and AI governance.
In the recent past, the central bank has been interacting with banks on AI, geopolitical issues, and ECL (expected credit loss) implementation. Additionally, RBI has also shared a draft framework on AI governance for regulated entities.
“The BFSI cybersecurity market size is estimated to grow at a double-digit CAGR through 2030 as banks and financial institutions continue to focus on operational resilience, address technology-related third-party risks, respond to tightening regulatory compliance needs, and mitigate the talent shortage in specialized cybersecurity roles,” said the report.
While BFSI players are witnessing a dip in capital expenditures (capex) on physical infrastructure, technology budgets are being allocated to cyber monitoring, identity management, fraud management systems, cloud security, and regular vulnerability assessments.
“The Financial Stability Report (FSR) 2025 has identified AI-enabled cyber threats as one of the critical emerging risks to the financial stability of the Indian economy.
Even as India’s banking system remains resilient with stress tests showing that gross NPAs will remain below 2% through 2028 in the baseline scenario, the focus on cybersecurity, particularly AI-driven financial crime prevention, is gaining momentum,” said the report.
“With AI-driven financial crime prevention becoming a strategic imperative, cybersecurity is set to be one of the largest technology expenditures for banks.
The question now is not whether banks will increase cybersecurity spending but how quickly they can build resilient and AI-ready digital ecosystems to secure their digital banking ecosystems,” added the report.
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