Mudra Compass

As India races toward becoming a digitally empowered economy, its Banking, Financial Services, and Insurance (BFSI) sector finds itself at a critical juncture. A powerful yet largely overlooked threat is emerging—quantum computing. While this revolutionary technology holds immense promise across fields like medicine, logistics, and artificial intelligence, it also threatens to upend the cryptographic foundations of our digital financial systems. If India’s BFSI sector does not act now, it could face a severe crisis in data security, consumer trust, and financial stability.

Understanding the Quantum Threat

Quantum computers work on principles like superposition and entanglement, enabling them to solve problems that are practically impossible for classical computers. This enhanced computational power, however, has a dangerous flip side—it could crack the cryptographic codes that protect today’s digital transactions and data.

Most financial systems today rely on encryption methods such as RSA and ECC (Elliptic Curve Cryptography). These algorithms assume it would take classical computers an impractically long time to break their codes. But quantum computers, using algorithms like Shor’s, can theoretically solve these problems in mere hours, rendering traditional encryption useless.

A 2024 study by the ISB Institute of Data Science titled “Quantum Resilient Banking: Strategies for a Secure Transition” paints a worrying picture. It found that CISOs and CTOs in India’s BFSI sector rated their post-quantum cryptography (PQC) readiness at just 2.4 out of 5. Worse, 57.5% of respondents expect quantum threats to impact their systems within the next three years. Despite this awareness, actionable preparedness remains limited.

Existing Cybersecurity Woes

Quantum risks arrive at a time when the BFSI sector is already grappling with a growing list of traditional cyber threats. Phishing attacks dominate the threat landscape, accounting for 65% of all incidents. DDoS (Distributed Denial of Service) attacks, which cripple online banking operations, represent nearly 47.5% of cases. Social engineering schemes—where attackers manipulate employees into sharing confidential data—add another 40% to the threat matrix.

These issues not only strain cybersecurity resources but also leave little bandwidth to plan for quantum threats. If financial institutions don’t start balancing immediate threats with long-term quantum risks, they may be blindsided by a new wave of more powerful cyberattacks.

Government Initiatives: The National Quantum Mission

In a positive step, the Indian government launched the National Quantum Mission (NQM) in 2023 with a budget of ₹6,003.65 crore over eight years. The mission aims to foster innovation in quantum computing, secure communication, and advanced materials through dedicated research hubs across top institutions.

This mission also holds promise for BFSI resilience, particularly in developing secure communication tools and quantum-safe cryptography. However, the involvement of private sector players—especially financial institutions—remains minimal. A NITI Aayog report recently stressed the importance of combining research, public education, industry collaboration, and regulatory preparedness for meaningful impact. Unless BFSI players actively engage with the NQM, they risk falling behind in securing their digital infrastructure.

Global Landscape and India’s Regulatory Gaps

Globally, countries like the U.S., China, and members of the EU are investing aggressively in quantum research. Tech giants such as IBM are targeting the development of 1,000-qubit quantum systems—potentially bringing quantum threats closer than initially expected. In these nations, regulators are already drafting compliance frameworks to ensure critical sectors like finance are prepared.

India, by comparison, faces a significant regulatory lag. The Reserve Bank of India (RBI), Securities and Exchange Board of India (SEBI), and Insurance Regulatory and Development Authority of India (IRDAI) has yet to publish formal guidelines on post-quantum security. This regulatory vacuum risks not just data breaches but also non-compliance with future global standards, which could harm India’s digital economy.

A Five-Point Roadmap to Quantum Readiness

To safeguard its future, India’s BFSI sector must take the following strategic steps:

1. Adopt Post-Quantum Cryptography (PQC) – Shift to quantum-resistant algorithms like lattice-based or hash-based cryptography to protect against future breaches. A gradual transition will help decommission outdated systems with minimal disruption.
2. Upskill the Workforce – Implement regular training programs to equip cybersecurity teams with knowledge of quantum risks and countermeasures. This will foster a culture of proactive defence.
3. Strengthen Public-Private Collaboration – Partnerships between government, academia, and BFSI leaders can fast-track the development and implementation of quantum-safe technologies. This will also encourage knowledge sharing and resource pooling.
4. Close Regulatory Gaps – Regulators must urgently establish guidelines on quantum resilience, including timelines and compliance checkpoints. Clear mandates will drive uniform implementation across the sector.
5. Promote Indigenous Innovation – Invest in local R&D for quantum technologies to reduce reliance on foreign solutions. Supporting start-ups and universities focused on secure quantum communications will also build long-term capacity.

Conclusion

Quantum computing represents both a tremendous opportunity and a formidable risk. For India’s BFSI sector, the challenge lies in anticipating a security paradigm shift and preparing accordingly. While the technology may still be maturing, its potential to break current encryption is no longer a distant concern—it’s a clear and present danger.

By adopting post-quantum cryptography, bridging regulatory gaps, collaborating with the government’s quantum mission, and building internal capabilities, the sector can stay ahead of the curve. The window for action is narrow, but with strategic foresight and coordination, India’s financial systems can emerge stronger, more secure, and future-ready.

The quantum reckoning isn’t a possibility—it’s inevitability. The time to prepare is now.