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Artificial intelligence is emerging as a major tool for the banking sector, but its growing use could also magnify existing financial and operational risks, Reserve Bank of India (RBI) Deputy
Governor Rohit Jain said on Thursday.
Speaking at the 13th SBI Banking & Economics Conclave in Mumbai, Jain said technology has moved beyond being a support system for banks and is increasingly becoming part of their overall risk architecture. Technology now plays a role across critical functions, including payments, customer onboarding, credit assessment, fraud monitoring and regulatory reporting.
Jain highlighted artificial intelligence as an area with both significant opportunities and potentialrisks for financial institutions. AI can help banks improve customer service, detect fraudulent activity, assess risks and increase employee productivity. However, automated systems can also amplify mistakes when they are used in decisions involving credit, fraud alerts, customer access, pricing and service delivery.
The RBI official stressed that banks will need strong safeguards as they expand their use of AI.
These include proper validation of AI systems, continuous monitoring, human oversight and clearly defined accountability for decisions made with the help of technology.
Jain also pointed to the growing dependence of financial institutions on external technology providers. Banks may outsource computing, software or other technology functions, but they remain responsible for managing the risks associated with those dependencies. Risks involving data protection, access controls, service recovery and reliance on common technologym providers could affect multiple institutions if a major disruption occurs.
He called on bank boards and senior management to develop a stronger understanding of technology so they can challenge assumptions, evaluate technology dependencies and ensure that resilience measures are properly tested.
Jain's remarks come as Indian banks increasingly integrate AI and other emerging technologies into their operations. The RBI's focus is therefore shifting beyond technological adoption towards ensuring that innovation is accompanied by adequate governance, resilience and accountability.
Speaking at the 13th SBI Banking & Economics Conclave in Mumbai, Jain said technology has moved beyond being a support system for banks and is increasingly becoming part of their overall risk architecture. Technology now plays a role across critical functions, including payments, customer onboarding, credit assessment, fraud monitoring and regulatory reporting.
Jain highlighted artificial intelligence as an area with both significant opportunities and potentialrisks for financial institutions. AI can help banks improve customer service, detect fraudulent activity, assess risks and increase employee productivity. However, automated systems can also amplify mistakes when they are used in decisions involving credit, fraud alerts, customer access, pricing and service delivery.
The RBI official stressed that banks will need strong safeguards as they expand their use of AI.
These include proper validation of AI systems, continuous monitoring, human oversight and clearly defined accountability for decisions made with the help of technology.
Jain also pointed to the growing dependence of financial institutions on external technology providers. Banks may outsource computing, software or other technology functions, but they remain responsible for managing the risks associated with those dependencies. Risks involving data protection, access controls, service recovery and reliance on common technologym providers could affect multiple institutions if a major disruption occurs.
He called on bank boards and senior management to develop a stronger understanding of technology so they can challenge assumptions, evaluate technology dependencies and ensure that resilience measures are properly tested.
Jain's remarks come as Indian banks increasingly integrate AI and other emerging technologies into their operations. The RBI's focus is therefore shifting beyond technological adoption towards ensuring that innovation is accompanied by adequate governance, resilience and accountability.
