Reserve Bank of India Governor Sanjay Malhotra said on Tuesday that artificial intelligence, if deployed carelessly in the financial sector, could create new forms of exclusion and financial instability at a pace that regulators and banks may struggle to manage. Speaking at the FIBAC 2026 Conference in Mumbai, he noted India’s unique advantage from its advanced public digital infrastructure, including Aadhaar, UPI, DigiLocker, ONDC, Account Aggregator and ULI. Malhotra said AI built on this infrastructure could significantly change financial services and improve inclusion, but warned of risks if not deployed responsibly. He stated that AI could do for financial judgment what UPI did for financial transactions, making it instant, granular, and available to the last mile. He added that AI deployed well can close existing gaps in financial inclusion faster than any preceding generation of technology, but deployed carelessly can entrench new forms of exclusion and instability. Malhotra said the Reserve Bank sees AI as a capability to be responsibly harnessed, not merely a risk to be contained. He said Indian banks cannot afford to remain on the sidelines as AI changes the economics of credit delivery, noting AI models can use alternative information such as cash flows, GST filings, utility payments and digital footprints to expand formal credit suitability. He highlighted AI-enhanced credit risk models, liquidity forecasting and scenario analysis, as well as customer service benefits like voice-based systems in Indian languages. He also said banks need strong safeguards