RBI governor urges banks to lead AI adoption

Reserve Bank of India Governor Sanjay Malhotra told bankers at a conference in India that the sector must take the initiative in shaping how artificial intelligence is used in financial services rather than letting the technology dictate changes. He urged banks to treat AI as a transformational force that requires rethinking core processes from risk management to capital allocation and customer service.

Malhotra warned passive or piecemeal use of AI could expose institutions to unintended consequences and reduce their ability to control outcomes. He added many routine tasks and workflows will need reassessment as AI systems are introduced.

The governor pointed to India’s public digital infrastructure as a base on which banks and other financial firms can build AI applications. Leveraging that infrastructure can speed development, help maintain interoperability and support regulatory oversight. He emphasized that AI systems should align with financial stability and consumer protection objectives.

Malhotra identified specific areas likely to be affected: algorithmic models in risk measurement and monitoring, predictive analytics influencing capital allocation, and automated interfaces changing customer service. He called for updated governance, stronger oversight frameworks and new staff skills to manage those changes.

In his address, Malhotra warned: “The only question now before us is whether you shape the AI journey or you let it shape you by default.”

Malhotra noted potential labour-market effects, saying software development roles may shift as coding tasks are increasingly handled by AI. He suggested firms and regulators examine changes in employment patterns and skill requirements.

The governor called on banks to create clear roadmaps for AI adoption that cover governance, risk controls, data standards and workforce planning. He added responsibility for integrating AI tools and setting controls rests with senior management and boards, which must coordinate with regulators as new applications are developed and scaled.