The Reserve Bank of India Governor Sanjay Malhotra signals steady interest rates as inflation stays within target range, while urging Indian banks to accelerate AI adoption cautiously amidst emerging risks.
Reserve Bank of India Governor Sanjay Malhotra said inflation remains under control, bolstering expectations that the central bank will keep interest rates on hold after leaving its main policy rate unchanged for a fourth straight meeting earlier this month. The RBI also trimmed its inflation forecast for the year ending in March to 5% from 5.1%, keeping it within the bank’s 2% to 6% tolerance range.
Malhotra said India’s economy continues to show resilience and that the country has sufficient foreign exchange reserves to cushion external shocks. According to Bloomberg News, the RBI has taken a different approach from several regional central banks since the conflict in the Middle East began, treating the disruption largely as a temporary supply shock rather than a reason to tighten policy. The central bank has indicated it would respond if higher energy costs start feeding broader and more persistent inflation.
The governor also urged Indian banks to move faster in adopting artificial intelligence, while warning that the technology brings fresh risks. Those risks include biased or opaque decisions, data privacy concerns and cyber threats. He said lenders need to invest in technology, infrastructure and staff training if they want to use AI effectively and safely. “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,” Malhotra said, according to Bloomberg News.
His comments come amid growing regulator concern about AI in finance. In April, RBI deputy governor Swaminathan J raised similar warnings about bias, data misuse and cyber risk, while the central bank’s Financial Stability Report in June identified AI-enabled cyberattacks as a major threat for banks and non-banking lenders. Malhotra said banks still appear well placed to face broader challenges, pointing to strong credit growth, low bad loans, ample liquidity and healthy profitability. He also said geopolitical and trade uncertainty remain risks, but argued that India’s economy should emerge stronger from the current pressures.
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