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Informist, Tuesday, Aug. 11, 2026

 

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--RBI Malhotra: AI calls for shift in how we evaluate risk 
--CONTEXT: RBI Governor Sanjay Malhotra speaks at FIBAC 2026
--RBI Malhotra: On track to implement Basel III guidelines
--RBI Malhotra: Regulatory burden on banks has reduced
--RBI Malhotra: AI holds huge promise but risks persist 
--RBI Malhotra: AI if well deployed, can help in financial inclusion 
--RBI Malhotra: See AI as a capability to harness not just risk to contain 
--RBI Malhotra: AI allows banks to serve customers better 
--RBI Malhotra: AI can use alternative data to assess credit worthiness 
--RBI Malhotra: AI-based grievance redressal can up costumer service quality
--RBI Malhotra: AI has potential to be profoundly inclusive technology 
--RBI Malhotra: Urge banks to delibrate on where they stand on AI adoption 
--RBI Malhotra: Need board-driven bk strategy for sustained investment in AI 
--RBI Malhotra: Banks must invest in technology, IT infra, skilling
--RBI Malhotra: Have to ensure that AI models are bias-free
--RBI Malhotra: Dependence on outside vendor for banks a risk
--RBI Malhotra: AI adoption in banks can erode human judgement
--RBI Malhotra: AI roll-out should not erode human judgement, accountability
--RBI Malhotra: Chosen a principle-based, proportionate approach towards AI
--RBI Malhotra: Urge banks to preserve human oversight when adopting AI
--RBI Malhotra: Trying to put in place digital payments intelligence platform
--RBI Malhotra: Need to leverage AI for dealing with digital frauds
 

 

MUMBAI – Adoption of artificial intelligence in the banking system holds huge promise but there are risks as well, Reserve Bank of India Governor Sanjay Malhotra said Tuesday. "It's (AI) totally a different way of organising things, doing things, doing business, doing banking," Malhotra said while addressing FIBAC 2026 here. "And so, and it requires really a total change in mindset. It's a shift in how we evaluate risk, serve customers, price capital, organise institutions."

 

Malhotra detailed various segments of banking, such as credit worthiness, grievance redressal and financial inclusion, where AI can help serve customers better. "AI, well deployed, can close existing gaps in financial inclusion faster than any preceding technological innovation," he said. 

 

However, he added that the central bank sees AI as a capability to be responsibly harnessed, and not merely as a risk to be contained. "There are many reasons why the Indian banks cannot afford to sit on the sidelines and watch," he said. 

 

 

AI models on alternative data, cash flows, GST filings, utility payment bills, digital platforms, they can all extend the frontier of Indian banking considerably, he said. AI allows banks to serve customers better and can be used to augment rather than merely to replace human judgment, he said. 

Malhotra highlighted that AI has the potential to be profoundly inclusive technology, adding that AI assisted grievance redressal and personalised financial guidance can enhance service quality to customers. "AI and AI alone can beat AI-delivered frauds," he said. 

 

The governor urged all the banks to deliberate going forward on where they stand in the journey of AI adoption, and what they can do to accelerate its adoption. It will require a board-driven strategy for banks, backed by sustained investment and, most importantly, a strong intent rather than a series of disconnected projects, he said.

 

"You will obviously need to invest in technology, IT infrastructure, tail-end, skilling, reskilling. You'll have to forge sustainable partnerships because you may not be able to do all of it on your own," he said.

 

Malhotra flagged that there can be erosion of human judgment and accountability when adopting AI in the banking system, adding that the ultimate responsibility has to lie with the bank and not with the vendor or with the algorithm. He also emphasised the risk of third-party vendor dependence on banks. "While we do acknowledge that you will need to build partnerships, because all banks, especially small banks, may not be able to have their own language, large language models and AI, they will have to depend on outside vendors," he said.

 

He highlighted that the central bank is taking measures to improve adoption of AI in the banking system, adding that the RBI is trying to put in place a digital payments intelligence platform. 

 

Separately, Malhotra said that the RBI has reduced the regulatory burden on the banks' boards and made it more principle and policy-based. Banks are well on target to implement the Basel III guidelines that are applicable to them from the beginning of 2027-28 (Apr-Mar), he added. The RBI last month issued a comprehensive overhaul of Basel Pillar 3 disclosure requirements for banks, introducing a revised disclosure framework aimed at improving transparency, comparability and market discipline while bringing Indian regulations closer to the Basel Committee's global standards. The new framework will come into effect from Apr. 1, 2027.  End

 

Reported by Pratiksha, Sagar Sen, and Radhika Tiwari

Edited by Akul Nishant Akhoury

 

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