The Reserve Bank of India (RBI) has sought inputs from banks on implementation of facial recognition or other artificial intelligence (AI)-based systems at ATMs, branch counters and banking outlets, particularly in locations identified as fraud hotspots.

If implemented, the technology could help strengthen fraud prevention by creating an additional security layer and improve operational efficiency in high-risk areas, said people familiar with the developments.

“This is being examined. Suggestions have been sought from banks including operational challenges. A final decision will be taken based on institutional capacities and to be implemented across both state-run and private banks,” an official said on condition of anonymity, adding that banks are expected to send their responses by the end of this month.

Queries emailed to the RBI did not elicit a response till press time.

A bank executive said while potential benefits of such systems include real-time fraud detection and blocking, there could be operational and regulatory challenges for wider adoption, including costs for deployment of the biometric identification set-up.

“We will have to see if all banks are prepared for necessary hardware upgrades such as installation of cameras and enhanced processing capabilities at ATMs and outlets, as well as integration complexities with existing infrastructure such as ATM switches, core banking systems and the National Payments Corporation of India networks,” said the executive, who did not wish to be identified.

Another bank executive highlighted that there could be concerns on account of customer privacy and also the need for support from the Unique Identification Authority of India and the requirement for Aadhaar linkage. “A more detailed review is required to ensure it does not violate any of the provisions of the Digital Personal Data Protection (DPDP) Act,” he said.

Earlier this month, the banking regulator released draft guidelines, applicable from July 1, for customer protection in electronic banking transactions, including online and card-based payments.

As per the draft guidelines, a bona fide victim, being an individual person and having lodged a complaint involving gross loss of an amount up to Rs 50,000 on account of fraudulent electronic banking transaction (s), would be compensated 85% of the net loss amount (calculated after reducing recoveries made, whether before or after paying the compensation, from the gross loss amount), or Rs 25,000, whichever is less, once during his or her lifetime.

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