India’s 28 regional rural banks (RRBs) have significant gaps in cybersecurity, data governance and digital capabilities, according to an assessment by the National Bank for Agriculture and Rural Development (Nabard), seen by Mint, and two government officials aware of the findings.
While only 11 RRBs have a fraud risk management system, none rates itself as largely or fully compliant with data-protection readiness. Not a single RRB has analytics or advanced data solutions.
Cybersecurity, compliance and data capabilities emerged as the sharpest gaps, with the country’s apex development finance institution for agriculture and rural development describing them as the “biggest capability gap” and “weakest link”.
The findings come against the backdrop of rising financial fraud in the country, with complaints involving a total ₹55,050 crore between 2021 and 2025, as per a government document reviewed by Mint. The 28 RRBs collectively hold ₹7.7 trillion in deposits and ₹5.8 trillion in advances.
A stark example of the cyber risks facing RRBs was the ransomware attack on C-Edge Technologies in July 2024. The State Bank of India and Tata Consultancy Services joint venture provides technology services to several cooperative banks and RRBs.
Digital adoption
Despite the scale of their operations, digital adoption and functionality remain limited. The median monthly transacting users account for just 12% of registered mobile and internet banking customers. Only four RRBs offer Unified Payments Interface (UPI) through their mobile banking applications, while just two allow customers to open loan accounts digitally.
The merchant ecosystem is similarly limited, with BHIM QR available at 10 RRBs, point-of-sale (PoS) terminals at six, and BHIM Aadhaar Pay at three, per the government document.
The bigger challenge lies in the underlying digital architecture, with 27 RRBs operating entirely on-premises and only one using the public cloud.
“In addition, 19 of these RRBs don’t have a business process management solution. Only eight RRBs have data warehouses, and none have fully digital regulatory reporting. Fraud risk management systems are present in only 11 RRBs, with 12 of them not having a security operations centre (SOC) and 12 RRBs not having a network operations centre (NOC),” said one of the two government officials cited above on the condition of anonymity.
The gaps indicate that while basic digital banking infrastructure is largely available across RRBs, the underlying systems required for advanced data management, continuous cyber monitoring, and stronger digital governance remain in their early stages.
Nabard’s assessment showed that basic payment infrastructure is largely in place. Immediate Payment Service (IMPS), National Electronic Funds Transfer (NEFT) and Real-Time Gross Settlement (RTGS) are available across all 28 RRBs, while Aadhaar Enabled Payment System (AePS) is available in 27 and UPI in 26.
Mobile banking is available in 27 RRBs and internet banking in 26. However, the relatively low transaction usage and limited digital functionality point to a gap between the availability of digital channels and their effective adoption.
Mint's queries emailed to Nabard, the Union finance ministry, the Reserve Bank of India and sponsor banks remained unanswered.
Need of the time
Experts say RRBs need to keep pace with the times. “The government recognizes the important role that the RRBs play with respect to financial inclusion, while recognizing that operational efficiency has been a concern,” said Vivek Iyer, partner at Grant Thornton Bharat.
RRBs are currently in the midst of a technology transformation, he said, adding that significant changes are expected by FY30, given higher growth expectations from RRBs and listing mandates for some RRBs by FY27.
Iyer, however, said the listing aspirations remain subject to regulatory ambiguity given RRBs' current capital structure, which does not accommodate outside equity.
To be sure, the government has consolidated the RRB sector and pushed the adoption of technology as part of a broader reform process. The number of RRBs has fallen from 196 in 2005 to 28 as of May 2025 under the “one state, one RRB” structure, while sponsor banks have also been asked to complete IT integration with their RRBs.
Under the Regional Rural Banks Act, 1976, a sponsor bank is a scheduled commercial bank.
Charan Singh, chief executive and founder director of think tank EGROW Foundation, said RRBs need to modernize their systems.
“It is appropriate that RRBs are modernized and that the latest advanced technology is used to their advantage,” Singh said, adding that RRBs need to compete with other financial institutions in a manner that is robust and inspires confidence among customers as well as regulators and supervisors.