AI Could Transform Lending Like UPI Changed Payments: Sanjay Malhotra, RBI Governor

RBI Governor Sanjay Malhotra has drawn a parallel between artificial intelligence and UPI, arguing that artificial intelligence (AI) has the potential to bring a similar transformation to the way banks make lending decisions.

Speaking at the FIBAC 2026 conference, Malhotra has asked banks to actively explore AI rather than wait for the technology to mature elsewhere.

More Borrowers Into The Credit System

One area where AI could make a difference is borrower assessment, mentioned Malhotra. Banks have traditionally relied on financial histories and other formal records when deciding whether to lend. That can make it harder to assess people who have little or no conventional credit history.

Malhotra has pointed to alternative information such as cash flows, GST filings, utility bill payments and data generated through digital platforms. AI models could process these sources and give lenders more information when evaluating potential borrowers.

According to him, this could matter for new-to-credit customers, gig workers and sections of the population that remain outside the formal credit system because they have limited financial records.

A Digital Infrastructure To Support AI

Malhotra has also mentioned many existing digital platforms that could provide a foundation for wider AI use in financial services.

These include Aadhaar, UPI, DigiLocker, ONDC, the Unified Lending Interface (ULI) and the Account Aggregator (AA) framework. He also highlighted the Digital Payments Intelligence Platform being developed by the RBI.

The platform is intended to add to India's digital payments infrastructure by using information from different sources to help identify potentially risky transactions.

The ULI, meanwhile, is being developed to facilitate the flow of digital information needed for lending. It could help lenders access alternative data while assessing customers who may not have extensive formal financial histories.

AI Could Help Banks Cut Operating Costs

The possibility of bringing down the operational cost-to-income ratio from the current 47-49 per cent range with greater use of AI, stated the RBI Governor.

The technology could be applied beyond lending, including areas such as risk assessment and other financial services. By processing large amounts of information, AI could also change how banks evaluate applications and make decisions.

However, greater automation would not mean that banks can step away from their responsibilities.

Human Accountability Is Pertinent

Malhotra has stressed that decisions involving AI must be explainable and remain subject to human accountability.

This becomes particularly important in lending, where an automated decision can determine whether a person gets access to credit. Banks would therefore need to understand how AI models reach their conclusions and retain responsibility for the resulting decisions.

His comments come alongside his broader emphasis on human oversight as banks increase their reliance on technology. The RBI has also flagged concerns around issues such as algorithmic bias and cybersecurity as AI becomes more widely used.