File picture of RBI Governor Sanjay Malhotra
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Indian lenders need to accelerate adoption of artificial intelligence by investing in technology and infrastructure besides training workers to upskill, central bank Governor Sanjay Malhotra said Tuesday.Malhotra, however, warned that wider AI use entails risks including biased or opaque decisions, along with data privacy and cybersecurity threats. He added that dependence on a small number of models or technology vendors could potentially leave the banking system exposed to errors. Banks should, therefore, be on guard when they rely on outside vendors, he said.“We have much at stake,” Malhotra told an industry event in Mumbai. “The banks that will win in the AI era will not necessarily be the ones that adopt AI faster or the most. They will be the ones who adopt it with full understanding of what they are deploying,” he added.Malhotra’s comments underscore a growing dilemma for India’s financial sector: banks are embracing AI to boost efficiency even as the technology creates vulnerabilities and gives cyber attackers more powerful tools. The risks are prompting policymakers to push for stronger safeguards and human oversight.Finance Minister Nirmala Sitharaman in April warned of unprecedented AI-related risks to banks and called for pre-emptive measures to secure IT systems, protect customer data and funds, and enable real-time sharing of threat intelligence.Central banks around the world are paying close attention to banks’ use of AI as concerns grow over cyberattacks, errors and operational failures. They are also assessing whether widespread use of the technology could expose many lenders to similar risks and threaten financial stability.Besides cyber threats, Malhotra identified geopolitical and trade uncertainties, as key risks facing India’s banking sector. He said banks are “well positioned” to withstand those challenges, citing robust credit growth, low bad loans, healthy liquidity and profitability.India’s economy will emerge “stronger” from current challenges, he said, pointing to resilient growth, contained inflation and ample foreign-exchange reserves.“All these things bode very well,” Malhotra said.More stories like this are available on bloomberg.com©2026 Bloomberg L.P.Published on August 11, 2026
