India Must Shape AI, Not Let AI Shape Banking, Says RBI Governor

India has spent the past decade building the digital rails for its financial system. Now comes the harder question: what happens when intelligence itself gets added to those rails?

RBI Governor Sanjay Malhotra believes India cannot afford to simply watch the transformation unfold.

Speaking at FIBAC 2026 on Tuesday, Malhotra said AI will force banks and financial institutions to rethink almost everything, from how they assess risk and price capital to how they serve customers and organise themselves. “The only question now before us is whether you shape the AI journey or you let it shape you by default.”

That, he suggested, is no longer a technology question. It is a business and banking question.

AI could do for financial judgment what UPI did for transactions

Malhotra said India is unusually well placed to exploit AI because it already has a powerful layer of public digital infrastructure. Aadhaar. UPI. DigiLocker. ONDC. The emerging Unified Lending Interface. Account Aggregators. These platforms, he said, give private companies a foundation on which they can build AI-led financial services. His larger proposition is striking: UPI transformed how money moves. AI could transform how financial decisions are made.

Malhotra argued that previous technological revolutions largely amplified physical capabilities and connectivity. AI is different. It can amplify human intelligence itself. The change is already visible in areas such as coding, where tasks that once required specialised expertise are increasingly becoming routine. For banks, that could mean a fundamental rethink of how institutions evaluate borrowers, manage risk, serve customers and allocate capital.

Banks are already moving

Malhotra said many banks have begun adapting to the shift, while others are still considering how to make the transition. He also pointed to progress on the RBI's broader regulatory agenda, including financial stability, customer-centricity, ease of doing business and reducing intermediation costs.

The central bank has automated more than 203 application types, delivered 99.9% of services within prescribed timelines and streamlined several regulatory processes. Banks are also preparing to implement applicable Basel III guidelines from the beginning of the next financial year under the prescribed glide path.

For Malhotra, however, the regulatory and technological agendas are increasingly converging. AI has a role to play in reducing intermediation costs, improving financial judgment and reshaping the way institutions operate. The message to India's banks is therefore fairly blunt: AI is coming. The question is no longer whether it will change banking. It is whether Indian banking will shape that change, or simply be shaped by it.

(With inputs from ANI)