New Delhi, Aug 11 (KNN) Reserve Bank of India (RBI) Governor Sanjay Malhotra said Indian lenders need to accelerate the adoption of artificial intelligence (AI) by investing in technology and infrastructure while upskilling their workforce.
Speaking at an industry event in Mumbai on Tuesday, Malhotra emphasised that banks that succeed in the AI era will not necessarily be those that adopt the technology fastest, but those that understand the systems they deploy and effectively manage the associated risks.
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,” Bloomberg reported.
AI Adoption Brings New Risks
Malhotra cautioned that wider use of AI could expose banks to risks including biased or opaque decision-making, data privacy concerns and cybersecurity threats.
He also warned that excessive dependence on a limited number of AI models or technology vendors could leave the banking system vulnerable to common errors or disruptions.
The RBI Governor urged banks to exercise greater caution when relying on external technology providers and ensure they have a clear understanding of the AI systems being deployed.
Need for Human Oversight
The comments come as banks increasingly explore AI to improve efficiency and automate operations, while policymakers are assessing the technology’s implications for financial stability. Malhotra’s remarks underline the need to balance technology adoption with adequate safeguards and human oversight.
Finance Minister Nirmala Sitharaman had earlier warned of emerging AI-related risks to banks and called for measures to strengthen IT systems, protect customer data and funds, and improve real-time sharing of information on cyber threats.
Banking Sector Well Positioned
Malhotra also identified geopolitical and trade uncertainties among the key risks facing India’s banking sector. However, he said Indian banks are well positioned to withstand these challenges, citing strong credit growth, low levels of bad loans, healthy liquidity and profitability.
He added that the Indian economy is expected to emerge stronger from the current challenges, supported by resilient growth, contained inflation and adequate foreign exchange reserves.
(KNN Bureau)
