- Finance Minister Nirmala Sitharaman earlier warned of emerging AI-related risks to banks and called for measures to strengthen IT systems and protect customer data.
- RBI Governor Sanjay Malhotra, speaking at an industry event in Mumbai on Tuesday, urged lenders to accelerate AI adoption by investing in technology and infrastructure while upskilling workers.
- Malhotra cautioned that wider AI use entails risks including biased decisions, data privacy, cybersecurity threats, and dependence on a small number of vendors.
- He noted that banks that win in the AI era will be those that adopt it with full understanding of what they are deploying.
- Malhotra's remarks underline the need to balance technology adoption with adequate safeguards and human oversight.
- Geopolitical and trade uncertainties were also identified as key risks facing India’s banking sector.
RBI Governor Sanjay Malhotra emphasized the urgent need for Indian lenders to adopt artificial intelligence (AI) while managing associated risks. Speaking at an industry event in Mumbai, he stated that banks must invest in technology and infrastructure and focus on upskilling their workforce to effectively navigate the AI landscape.2
Malhotra cautioned that the broader use of AI could lead to biased or opaque decision-making, alongside concerns regarding data privacy and cybersecurity threats. He noted, “We have much at stake… The banks that will win in the AI era will not necessarily be the ones that adopt AI faster or the most. They will be the ones who adopt it with full understanding of what they are deploying.”34
He also warned against excessive reliance on a limited number of AI models or technology vendors, which could expose the banking system to common errors or disruptions. “Banks should, therefore, be on guard when they rely on outside vendors,” he added.
Malhotra's remarks come as banks increasingly explore AI to enhance efficiency and automate operations, while policymakers assess the technology's implications for financial stability. His comments underline the necessity of balancing technology adoption with adequate safeguards and human oversight.5
Earlier, Finance Minister Nirmala Sitharaman had also highlighted emerging AI-related risks to banks, calling for measures to strengthen IT systems, protect customer data and funds, and improve real-time sharing of information on cyber threats.1
“Malhotra cautioned that excessive reliance on a limited number of AI models or vendors could expose the banking system to common errors or disruptions. He also noted that banks that win in the AI era will be those that adopt it with full understanding, not necessarily the fastest adopters.”
