RBI Governor Sanjay Malhotra Warns Banks: Shape AI’s Future or Let It Shape You

Speaking at the FIBAC 2026 conference on Tuesday, Malhotra said adopting artificial intelligence requires a fundamental change in how financial institutions evaluate risk, serve customers, price capital and organize their operations.

“Doing business, doing banking, and so on, requires a total change in mindset,” Malhotra said. “It's a shift in how we evaluate risk, serve customers, price capital, organize institutions. Happy to know many of the banks are already doing it. Some of you are considering doing it.”

He added, “The only question now before us is whether you shape the AI journey or you let it shape you by default.”

Highlighting India's strategic position in adopting artificial intelligence, Malhotra said the country has a unique advantage because of its robust public digital infrastructure.

“We in India stand at a unique vantage point to leverage AI. We have the most advanced public digital infrastructure, whether it is Aadhaar, UPI, DigiLocker, ONDC,” Malhotra stated.

He said efforts were also underway to build, improve and expand the unified lending interface and the account aggregator. According to Malhotra, these platforms are public goods on which the private sector can build artificial intelligence, with the technology having the potential to do for financial judgment what UPI did for financial transactions.

Reflecting on earlier technological shifts, Malhotra said historical innovations had multiplied physical power and connectivity, while artificial intelligence directly multiplies intelligence. He noted that activities such as computer coding, once regarded as complex, have now become routine as attention shifts toward applications involving intelligence.

Malhotra also revisited priorities outlined at the previous year's conference and reported significant progress in financial stability, customer centricity, ease of doing business and reducing intermediation costs.

He confirmed that banks remain on track to implement applicable Basel III guidelines from the beginning of the next financial year under the provided glide path. The central bank has also finalized frameworks covering credit risk capital, expected credit loss, project finance, related party transactions and dividend policy, backed by enhanced supervisory mechanisms.

On reducing the regulatory burden, Malhotra said operational details had been shifted to management while instructions were streamlined. The RBI automated more than 203 application types and delivered 99.9 per cent of services within prescribed timelines.

The central bank also rationalized working capital norms, reviewed bulk deposit pricing and delegated specific foreign exchange approvals to authorized dealers.

Measures were also taken to expand bank credit through norms covering acquisition finance, priority sector lending, project finance and alternative investment funds.

“Certainly, in all these areas, I think AI has a big role to play,” Malhotra added, stressing that reducing intermediation costs remains an ongoing collaborative effort between regulators and banking institutions.

The Governor’s remarks placed artificial intelligence at the centre of the banking sector’s next phase of transformation, while emphasizing that institutions must actively determine how the technology reshapes financial judgment, operations, customer service and risk management.