SBI Chairman Warns of AI Lending Risks

SBI Chairman CS Setty cautioned that the rapid expansion of digital finance, platform lending and AI-driven underwriting is creating both opportunities and serious vulnerabilities for banks. Speaking at the CII Annual Business Summit, he warned that cyber risks, algorithmic biases, operational weaknesses and growing systemic interconnectedness could undermine the sector if governance and risk management frameworks fail to keep pace with innovation.

Setty stressed that trust must remain the core principle of India’s financial system. He noted that innovation without trust cannot sustain itself and emphasised that speed in adopting new technologies should never come at the cost of safety or financial inclusion. The customer’s confidence in the integrity of the system, he said, is the banking sector’s most valuable asset.

Highlighting India’s massive investment needs to become a developed nation by 2047, Setty pointed to estimates of ₹7,600–6,500 lakh crore required by 2035. He clarified that banks alone cannot meet this scale of funding and called for deeper participation from the bond market, mutual funds, pension funds and insurance companies.

Setty also observed that the nature of savings is shifting, with 90 percent of bank balance sheets still reliant on deposits. He urged financial institutions to adapt their strategies to evolving savings patterns while strengthening internal controls to manage the new risks arising from AI-based lending models.