India central bank head says AI can approve loans humans would have turned down, says the technology is, 'a capability to be responsibly harnessed and not merely as a risk to be contained'

An AI-assisted alternative data loan bonanza?

by · TechRadar

News By Rahim Amir Published 15 August 2026

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  • RBI Governor Sanjay Malhotra tells banks that AI trained on alternative data such as cash flows, GST filings, and utility payments can extend credit to borrowers that manual underwriting cannot currently assess
  • The pitch came bundled with caution, insisting that banks take safety and visibility measures including complete AI inventories, red-teaming before deployment, and the capacity to explain lending and fraud decisions
  • The RBI insists, however, that accountability stays human; banks, not their algorithms, will be answerable to customers, auditors, and the Reserve Bank when AI-driven decisions go wrong

The governor of the Reserve Bank of India (RBI) has told the country's banks to put artificial intelligence at the heart of their lending patterns.

The approach is based on the assumption that models trained on unconventional data can identify and leverage data points that manual underwriters would struggle to spot or justify easily.

This would, as per RBI governor Sanjay Malhotra, both strengthen the credit market and enable financial inclusion by adding a new class of borrowers previously overlooked by conventional methods.

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Cautious AI optimism from one of the world's largest central banks

The Reserve Bank of India is not a small central bank by any measure, and remarks by its governor therefore can often shape not only domestic but global markets.

His position on unlocking credit markets for users with little or no financial history by adding raw compute that considers other signals such as cash flow, GST tax filings, utility payments, and one's digital footprint considerably changes the landscape in a part of the world where banks are traditionally more conservative than their global peers when it comes to lending.

Malhotra also noted that this is exactly the data that a first-time borrower, a gig worker, or a small enterprise without formal books lacks, even as AI enables better monitoring of debtors' financials.

“Predictive models can identify borrowers on the cusp of default early enough to counsel rather than merely recover,” he added. “Used well, AI may be the most powerful accelerator to financial inclusion.”

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