RBI Governor Sanjay Malhotra urges banks to step up AI investment

MUMBAI — Reserve Bank of India Governor Sanjay Malhotra has asked banks to move faster on artificial intelligence, urging lenders to step up spending on the technology to sharpen operations and strengthen risk controls.

Speaking at an industry event, Malhotra made it clear that the central bank sees AI not as a futuristic luxury but as a current necessity. He said lenders must treat AI investment as a priority, not an afterthought.

A nudge towards faster adoption

The Governor's remarks come at a time when Indian banks are grappling with rising operational costs and mounting cyber threats. Malhotra's message was direct: those who lag in adopting AI risk falling behind in efficiency and safety.

He did not offer specific figures or deadlines, but the tone suggested the regulator expects visible progress soon. Bankers in the audience took note, with several nodding as he spoke.

Efficiency and risk management

Malhotra highlighted two areas where AI can deliver immediate gains: customer service automation and fraud detection. He pointed out that machine learning models can process transactions in real time, flagging anomalies faster than any manual review.

"The technology is available. The question is whether we have the will to deploy it at scale," he said, according to people present at the event. The central bank has not yet issued any formal directive, but the governor's public push is being read as a signal of things to come.

Balancing innovation with caution

While urging speed, Malhotra also struck a note of caution. He warned that AI adoption must not compromise data privacy or customer protection. Banks, he said, need to build robust governance frameworks around their AI models.

This dual message — accelerate but stay responsible — is typical of the RBI's approach under his leadership. The governor has previously spoken about the need for financial institutions to embrace technology without losing sight of systemic stability.

What this means for lenders

For India's banking sector, the push could translate into larger technology budgets in the coming quarters. Larger lenders are already experimenting with AI-driven chatbots and credit scoring tools; smaller banks may now feel pressure to catch up.

Industry analysts say the RBI's backing could also encourage more fintech partnerships. Banks that were hesitant to share data with third-party AI firms might now find it easier to justify such collaborations.

No official circular has been released yet, and the RBI has not confirmed any timeline for regulatory changes. But the governor's public stance is unlikely to be ignored by boardrooms across the country.

Watch for announcements from major banks in the next few months regarding AI-focused investments. The regulator's next policy review could also offer more concrete guidance on how it expects lenders to integrate artificial intelligence into their operations.