Banking on AI: The Race to Survive India’s Data Privacy Revolution

Image Source: Quytech

Indian banks are at a pivotal crossroads as the Digital Personal Data Protection Act (DPDPA) ushers in a new era of data privacy and regulatory scrutiny. A landmark report released at the 4th IBA CISO Summit 2025 by Protiviti, in partnership with the Indian Banks’ Association, has sounded an urgent call for banks to rapidly adopt artificial intelligence (AI), privacy-enhancing technologies (PETs), and privacy-by-design strategies to meet the sweeping demands of the DPDPA.

Key Highlights:

Significant Data Fiduciaries: Most banks, given the vast amounts of sensitive personal data they process, are expected to be classified as Significant Data Fiduciaries under the DPDPA. This status brings heightened obligations, including mandatory Data Protection Impact Assessments (DPIAs), algorithmic transparency, regular audits, and the appointment of dedicated Data Protection Officers.
AI and Automation: The report stresses that AI is not just a compliance tool but a necessity for scalable, efficient privacy management. From automating Know Your Customer (KYC) and fraud detection to managing consent and data minimization, AI-driven solutions are essential for operational resilience and regulatory alignment.
Privacy Risks and Challenges: Unique sectoral risks such as algorithmic profiling, third-party data sharing, and opaque consent management are under the spotlight. The report provides an operational playbook for embedding privacy-by-design across all critical banking functions.
Regulatory Overlap: DPDPA’s requirements will intersect with existing Reserve Bank of India (RBI) and Securities and Exchange Board of India (SEBI) guidelines, adding complexity. Banks must harmonize data retention, breach reporting, and minimization protocols across multiple regulatory regimes.
Continuous Compliance: Compliance is not a one-off project. The report advocates for a risk-based, adaptive model that evolves with emerging threats, regulatory changes, and technological advancements.

As the DPDPA’s implementation accelerates, the message is clear: Indian banks must urgently invest in AI and privacy technologies to safeguard customer trust, ensure regulatory alignment, and future-proof their digital transformation.

Sources: The Economic Times, Devdiscourse, SISA InfoSec