State Bank of India Chairman Challa Sreenivasulu SettyMUMBAI: Artificial intelligence could help banks expand credit to rural India, small businesses and farmers while improving risk assessment and productivity, SBI chairman CS Setty said at FIBAC 2026, but banks will have to strengthen cyber defences, governance and human oversight as they expand the use of the technology.Setty said the next phase of AI-led banking should move beyond retail banking and customers with established financial histories. “The next wave of AI-led banking must take us deeper into the economy—to rural India, small businesses, and customers whose financial histories may not fit conventional models,” he said.Agriculture is one area where AI could expand access to credit and improve portfolio management. According to Setty, “AI can support better farm-level decisions, while data-driven risk assessment, digital records, and satellite imagery can help banks improve both credit access and portfolio management.” He said adoption of such technology was already taking place in farm lending.The larger challenge is to move AI applications from pilots to wider use. Setty said banks must make these capabilities affordable and accessible at the last mile and use their scale and reach to convert technology into economic opportunities. “The challenge is to take these capabilities beyond pilots and make them affordable, practical, and accessible at the last mile,” he said.AI is already being used by banks to understand customers, improve services, strengthen risk management and make credit processes more efficient. Setty said its next major application could extend across customer experience, employee productivity and risk management. The SBI chairman was speaking at the inaugural address of the annual seminar orgainsed by FICCI and IBA the theme of which is ' Winning in the AI Era: The New Playbook for Indian Banks' this year.He said AI would become a major transformation for banking because financial institutions sit at the intersection of people, businesses, information and capital. “AI has the potential to influence virtually every part of economic activity,” he said.The technology could also help India pursue its goal of becoming a developed economy by 2047. Setty said the more consequential question was how banks use AI beyond their existing applications and take it into parts of the economy that conventional banking models do not adequately cover.The adoption of AI will also create new risks for banks. Setty said more sophisticated technology could produce more sophisticated cyber threats and allow fraud to evolve faster than conventional systems can respond. “Banks will, therefore, have to strengthen their defenses at the same time as they expand their use of AI,” he said.Governance will have to change as AI systems become more autonomous. According to Setty, banks will need to reconsider oversight, model risk, transparency and responsibility, with greater human involvement in important decisions. “The more consequential the decision, the greater must be our emphasis on explainability and human accountability,” he said.Trust remains central to this transition. Setty said banking ultimately depends on trust and that banks must ensure that the use of AI does not undermine the confidence customers place in financial institutions.The technology will also change the nature of work in banking. Setty said banks would need to prepare employees for an AI-led environment because “the banking workforce of the future will work very differently from the banking workforce of today.”He said Indian banks were entering this transition from a position of stronger balance sheets, healthier asset quality, sound capital positions and sustained profitability. The institutional framework built over the years had also given banks the ability to respond to changes while maintaining stability and trust.Setty said the test of AI would ultimately be its economic impact rather than the sophistication of the technology. It should help small businesses obtain timely credit, enable farmers to manage risks and improve productivity, and make financial systems safer and more resilient.“Going forward, AI will be more than the next chapter in the technology story of banking,” Setty said. “It can become an important instrument in India’s economic progress.”