Reserve Bank of India Governor Sanjay Malhotra has cautioned that unchecked artificial intelligence usage in financial services may lead to increased exclusion and systemic risks, despite its potential to transform India’s digital economy.
Reserve Bank of India Governor Sanjay Malhotra has warned that artificial intelligence, if adopted carelessly in finance, could widen exclusion and add fresh layers of instability faster than regulators and banks can respond.
Speaking at the FIBAC 2026 conference in Mumbai, Malhotra said India is unusually well placed to benefit from AI because it already has a broad digital public infrastructure built around Aadhaar, UPI, DigiLocker, ONDC, the Account Aggregator framework and ULI. He said that, when built on top of that system, AI could transform financial services in much the same way that UPI changed payments.
Malhotra argued that the technology could help extend credit, improve customer service and sharpen risk management. He said AI tools could draw on cash flows, GST filings, utility payments and other digital signals to assess borrowers who might otherwise be overlooked, including new-to-credit customers, gig workers and smaller businesses without formal accounts. He also said AI-assisted forecasting and stress analysis could help banks spot signs of trouble earlier than traditional balance-sheet reporting.
But the governor paired that optimism with a warning. According to his remarks, AI can just as easily entrench new kinds of exclusion if it is deployed poorly, and the speed of that damage may outstrip the ability of supervisors to react. He said the Reserve Bank views AI as something to be responsibly harnessed rather than simply contained, while noting that the central bank’s approach, shaped by the FREE-AI Committee and draft model-risk rules, is intended to be principles-based and proportionate.
Malhotra also pointed to possible benefits in customer service, including AI-assisted grievance handling, language support in Indian languages and early-warning systems for borrowers at risk of default. Still, he made clear that banks will need strong safeguards as the technology spreads, and that the RBI plans to keep engaging with the industry as the risks and uses of AI evolve.
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