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Informist, Tuesday, Oct. 7, 2025

 

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--RBI Sankar: If left unattended, AI may pose unprecedented threats 
--RBI Sankar: Benefits of AI transformative but need to be used responsibly 
--CONTEXT: RBI Deputy Governor Sankar speaking at Global Fintech Fest 
--RBI Sankar: Industry, regulators, academia need to partner on AI 
--RBI Sankar: India should move to creating, not only consuming, AI apps 
--RBI Sankar: Need to invest in nurturing talent for AI deployment 
--RBI Sankar: Every AI deployed must provide fair access, respect privacy 
--RBI Sankar: AI must reinforce the confidence of customers 
--RBI Sankar: Industry should develop self-regulation for AI 
--RBI Sankar: Industry should develop own governance standards for AI 
--RBI Sankar: Will require parallel focus on fincl, AI literacy 
--RBI Sankar: Ethical sourcing of data important for fincl cos 
--RBI Sankar: Fincl AI apps must be designed so as to not destabilise mkts 
--RBI Sankar: Critical infrastructure must be ring fenced from risks of AI 
--RBI Sankar: Aim to foster fintech ecosystem with adequate safeguards 
--RBI Sankar: Aim to foster ecosystem where fincl innovation flourishes 
--RBI Sankar: Accountability for AI use must always lie with human actors
--RBI Sankar: Artificial intelligence to shake up finance, governance 
--RBI Sankar: AI to be foundational driver of individual, business decisions 
--RBI Sankar: AI integration into fincl systems must be approached carefully 
--RBI Sankar: AI can lead to better credit assessment, fraud detection 
--RBI Sankar: AI can lead to operational efficiency, cost reduction 
--RBI Sankar: AI can help with regulatory compliance 
--RBI Sankar: AI can break language barriers, improve fincl inclusion 
--RBI Sankar:Credit profiling, systemic exclusion possible if AI data biased 
--RBI Sankar: AI may lead to systematic risks in fincl sector
--RBI Sankar: Difficult to assign responsibility on harm caused by AI 
--RBI Sankar: Regulation may be slow to catch up with fast-moving AI change 
--RBI Sankar: Widespread AI use in trading could lead to mkt dislocation 
--RBI Sankar: Policies must have "People First" principle 

 

MUMBAI – Reserve Bank of India Deputy Governor T. Rabi Sankar said artificial intelligence may pose an unprecedented threat if left unattended by policymakers. The benefits of the use of artificial intelligence were transformative, but need to be used responsibly, he said at the Global Fintech Fest 2025 here Tuesday. 

 

Artificial intelligence will be a foundational driver for individual and business decisions in the future, Sankar said. At the same time, integrating artificial intelligence into financial system must be approached carefully. The technology can help with credit assessment, better real-time fraud detection and operational efficiencies that reduce the cost of doing business and help entities better comply with regulation.

 

Even as artificial intelligence shakes up finance and governance, biased datasets and training models may taint the use cases of the technology, Sankar said. These may lead to credit profiling and systemic exclusion, with potential systemic risks in the financial sector. These concerns are amplified due to a lack of transparency in the decision-making of the model, especially when it is difficult to assign responsibility to harm caused by artificial intelligence. 

 

In this environment, the RBI aims to have a regulatory environment where innovation continues in the financial technology ecosystem, with adequate safeguards for customers. Sankar said he believes in people first policies, especially when it comes to fintech and artificial intelligence. The deputy governor said that the aim would be for the regulator to find a middle-ground between being too "light-touch" or rigid. In this regard, he said that regulatory sandboxes provide for safe spaces to test out innovations.

 

Ultimately, the responsibility of the impact of artificial intelligence would lie with the human actors or entities which have deployed it, Sankar said. With technological change moving so far, especially in artificial intelligence use, regulation may be slow to catch up. In such a case, widespread use of artificial intelligence even for trading – some of which has already begun to be used – has the potential to bring about market dislocation. Thus, financial applications of artificial intelligence must be designed so as to not destabilise markets, the regulator said.

 

"Financial AI applications, in particular, must be designed such that they cannot inadvertently destabilise markets, or payment systems, or consumer confidence," Sankar said. "This approach demands safety by design, rather than safety as an afterthought. Safeguards must be embedded throughout the lifecycle, from conception and data training to model validation and real-world application."

 

The industry should develop its own governance standards and self-regulation for artificial intelligence use, the RBI deputy governor said. Every model deployed should reinforce the confidence of customers in it while also providing fair access and respect an individual's privacy, he said. With the change in technology, digital and artificial intelligence literacy will have to move hand in hand with financial literacy. 

 

The fintech industry, regulators such as the RBI, and acaedemia must come together and partner on artificial intelligence use and regulation, Sankar said. India should also invest in nurturing talent for deploying artificial intelligence in order to become a creator instead of only a consumer of such applications, he said. 

 

"Entities should have in place systems for responsible data governance, ethical sourcing of data, and privacy by design in every model," the RBI deputy governor said. "They should develop common standards, toolkits, and disclosure mechanisms, so that model design, training data, and decision logic can be explained."  End

 

Reported by Aaryan Khanna and Sagar Sen

Edited by Deepshikha Bhardwaj

 

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