The global outage at Amazon Web Services (AWS) last week, which disrupted thousands of businesses and critical applications across sectors, has reignited a long-overdue discussion on operational risk within India’s banking, financial services and insurance (BFSI) ecosystem. As Indian financial institutions deepen their reliance on cloud platforms, the event serves as a vivid reminder that digital transformation, without a commensurate investment in resilience, can expose systemic fragilities that extend far beyond IT.
Over the past decade, India’s BFSI landscape has rapidly migrated toward cloud-based architectures. Core banking systems, mobile applications, risk models and customer data warehouses increasingly sit within public cloud environments. The promise of scalability, efficiency and speed has driven adoption at an unprecedented rate. Yet, the AWS outage highlights a sobering truth: as critical workloads move into shared digital infrastructure, operational risk becomes as much about external dependencies as about internal controls.
When a major cloud provider falters, the ripple effect is immediate and far-reaching. Banking apps freeze, payment gateways time out, customer onboarding portals stall and call-centre operations falter. For a digitally dependent sector like BFSI, where customer experience and regulatory compliance hinge on uninterrupted availability, such incidents strike at the heart of business continuity.
The more insidious challenge, however, lies in the web of secondary dependencies surrounding the cloud. An AWS outage is rarely just about AWS. Modern financial operations rely on an intricate network of external providers: content delivery networks (such as Akamai or Cloudflare), payment switches and gateways, telecom operators that power network connectivity, identity and authentication platforms, API management layers, and SaaS tools for CRM, analytics and security monitoring. Each of these operates as a critical cog in the BFSI technology stack. A failure at any point, whether a global DNS malfunction, a telecom fibre cut, or downtime at a third-party API provider, can cascade into widespread service disruption.
Indian BFSI firms, in particular, are increasingly exposed to such interlinked risks. The move towards open banking, real-time payments and digital KYC has exponentially increased reliance on external APIs, cloud-native services and fintech integrations. While these technologies enable agility and innovation, they also blur the boundaries of responsibility. When a payment fails or an app crashes, the customer does not distinguish between the bank and its vendor. Accountability ultimately flows to the financial institution.
Regulators have been quick to recognise this evolving landscape. The Reserve Bank of India’s Master Direction on IT Outsourcing and the IRDAI’s guidelines on operational risk both require institutions to maintain oversight and control over third-party arrangements. However, the current frameworks may not yet fully capture the systemic risk arising from concentrated digital dependencies. When a handful of hyperscale providers or network operators form the backbone of the entire financial ecosystem, the risk is no longer isolated, it is structural.
To address this, Indian BFSI institutions must reimagine operational risk management from the ground up. Redundancy should move beyond data backups to encompass architecture-level diversity: genuine multi-cloud deployment, vendor diversification and modular systems that can continue running even when a key external service fails. This calls for building independent fallback mechanisms, such as on-premise replicas for critical functions or domestic cloud alternatives for essential workloads.
Equally important is visibility. Many financial institutions still lack a real-time map of their dependency chain. They may know who their direct vendors are but not the sub-vendors supporting them—such as network providers, storage clusters, or authentication nodes. Comprehensive dependency mapping, coupled with active monitoring of vendor health and incident response timelines, must become a board-level priority.
Communication too must evolve into a core risk discipline. Transparent, timely updates during service disruptions can mitigate reputational fallout. Customers are more forgiving of failure than of silence. Institutions that communicate proactively – acknowledging impact, explaining cause and outlining recovery steps,tend to retain trust even through crises.
In the near future, regulators may also step in to redefine accountability. Globally, there is growing discussion around treating cloud and digital infrastructure providers as critical financial utilities, subject to resilience audits and stress tests. If similar measures emerge in India, BFSI firms will need to demonstrate not just internal continuity plans but shared resilience frameworks with their external partners.
Ultimately, the AWS incident is a symptom of a larger truth: the operational fabric of finance has become inextricably linked to a handful of global digital players. The next major outage could stem from a different node—an undersea cable fault, a global authentication failure, or an outage at a SaaS provider that underpins credit scoring or anti-fraud monitoring. For India’s financial ecosystem, the real question is not whether such events will occur, but how quickly and confidently institutions can recover when they do.
In a digital economy where uptime defines credibility, operational resilience has become the new currency of trust. The institutions that treat dependency management as strategically as customer acquisition, investing in foresight, diversification and transparency, will emerge as the true leaders of India’s next financial decade.
