Reserve Bank of India Governor Sanjay Malhotra has said artificial intelligence could transform India’s banking sector as deeply as economic liberalisation did in the 1990s and digitalisation did in the 2010s. Speaking at the FIBAC 2026 conference, Malhotra described AI as one of the technologies that could shape the future of banking in India.
The Governor said AI has the potential to change how banks provide credit, assess customers, manage risks and deliver financial services. India’s strong digital infrastructure, including systems such as UPI and digital identity platforms, gives the country a strong base for adopting AI across financial services.
One of the biggest opportunities could come from lending. AI can process large amounts of information and identify patterns that may not be immediately visible through traditional banking systems. This could help banks assess borrowers more efficiently and potentially bring more people and small businesses into the formal credit system.
Malhotra said AI could do for lending what UPI has done for payments. UPI has made digital payments faster and easier for millions of Indians, and the Governor believes AI could similarly improve access to financial services if it is implemented responsibly.
The technology could also help banks improve customer service. AI-powered systems can handle routine queries, assist with complaints and provide faster responses. The Reserve Bank has already supported AI-based initiatives in India’s digital payments ecosystem, including AI tools designed to help customers with payment-related complaints and transaction information.
At the same time, the RBI Governor stressed that banks should not adopt AI simply because the technology is becoming popular. The banks most likely to succeed in the AI era will be those that understand the technology properly and maintain clear responsibility for the decisions made with its help.
This issue becomes particularly important when AI is used for financial decisions. Credit approval, fraud detection and risk assessment can directly affect customers. If an AI system makes an incorrect or unfair decision, banks need to be able to explain what happened and take responsibility for the outcome.
Cybersecurity is another major concern. AI can help banks detect suspicious transactions and identify unusual behaviour, but criminals can also use AI to create more sophisticated scams and frauds. Malhotra has therefore argued that AI itself may become an important tool in fighting AI-enabled financial fraud.
The changing technology landscape could also influence employment within banking. Some repetitive administrative tasks may increasingly be automated, while demand grows for professionals who understand AI, data, cybersecurity and technology governance. Banks are likely to need a combination of technology expertise and traditional financial knowledge.
For the RBI, the challenge is to encourage innovation without compromising the stability and safety of the financial system. The central bank has been emphasising responsible AI adoption, stronger governance and proper oversight as financial institutions increase their use of advanced technology.
India’s experience with digitalisation provides an important foundation for this transition. Over the past decade, digital payments and online banking have changed the way people interact with financial institutions. AI could be the next major stage of that transformation.
The impact may extend beyond traditional banks. Fintech companies, payment providers, insurers and other financial institutions are also adopting AI for customer service, fraud prevention, risk management and personalised financial products.
For customers, the benefits could include faster services, better access to credit and more personalised financial products. However, protecting privacy, maintaining transparency and ensuring human accountability will remain important as AI becomes more deeply integrated into banking.
Overall, Malhotra’s comments suggest that AI is no longer being viewed simply as another technology upgrade for India’s banking sector. It could become a fundamental part of how banks operate and serve customers during the current decade. The success of this transformation, however, will depend on whether banks can balance innovation with safety, accountability and customer protection.
