Will AI make banking riskier? Why RBI wants banks to keep human judgment in the loop

The Reserve Bank of India (RBI) flagged in its September 2026 bulletin how the risk landscape, including threat to cybersecurity, is evolving rapidly as technology continues to transform banking. The report analyses Artificial Intelligence (AI) as both a risk and an opportunity.

AI: Risk or opportunity?

The RBI report states that AI can be both an instrument of attack and a powerful tool of defence.

"While malicious actors can use it to scale phishing, impersonation, vulnerability exploitation and other cyberattacks, financial institutions can deploy AI for continuous threat detection, behavioural anomaly analysis and automated incident response," it says

The report further notes that AI can strengthen customer service, improve fraud detection, support risk assessment, enhance productivity and help institutions analyse large volumes of information.

"Artificial intelligence has the potential to reduce the cost of processing and interpreting information itself." -- RBI Bulletin September 2026

But, at the same time, it can amplify errors as quickly as it amplifies efficiency, the report added.

This is particularly relevant in financial services, where automated outputs can influence credit decisions, fraud alerts, customer access, pricing and service delivery.

"The use of AI must, therefore, be accompanied by appropriate validation, monitoring, human oversight and clear accountability," the RBI bulletin read.

Who's at an advantage? What should institutions do?

The report states that as both the defender and the attacker increasingly have access to similar tools, the advantage will not necessarily belong to the institution that deploys the most sophisticated technology.

"It may belong to the institution that can understand, govern and deploy technology with the greatest degree of discipline and foresight," the RBI says.