AI in banking must be adopted responsibly, with prudence, says RBI Rao
This story was originally published at 22:08 IST on 22 September 2025
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MUMBAI – Adoption of artificial intelligence in the banking sector must be done in a responsible and measured manner, said M. Rajeshwar Rao, deputy governor of the Reserve Bank of India. The excitement around AI's benefits should not overshadow prudent risk management, he said.
"As AI transforms financial services, it's clear this is a development which is not a mere upgrade but a major shift impacting products, processes and operations," Rao said. He was speaking at an event organised by CNBC-TV18 on Sept. 16. His speech was uploaded on the RBI website Monday. "From the risk perspective, the long-term implications of AI adoption on the financial system remain uncertain but exhibit potentially far-reaching consequences," Rao said.
He said it is imperative for the financial sector to approach AI adoption with foresight, investing not just in innovation but also in resilience by building strong governance structures, diversifying dependencies, continually assessing emerging risks and ensuring that AI strategies align with the long-term safety and sustainability of the financial system.
Rao also highlighted the importance of ensuring AI-driven decisions are ethical, unbiased and transparent in order to build a sustainable and empowered financial future. "This calls for 'optimistic vigilance' wherein AI and other technologies in banking are neither feared nor embraced blindly but navigated," Rao said. "The RBI, on its part, will continue to provide an enabling regulatory environment so that together we can build a banking system that truly builds Bharat, and not just builds, but transforms Bharat," he said. End
Reported by Srijita Bose
Edited by Ashish Shirke
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