State-owned banks in India are making significant strides in adopting Artificial Intelligence (AI) to transform their operations. A recent survey by FICCI and the Indian Banks Association (IBA) highlighted AI as the most disruptive force set to reshape banking in the near term, particularly in credit underwriting, risk assessment, and collections.
SBI Leads with Analytics 2.0 Initiative
The country's largest lender, State Bank of India (SBI), is at the forefront, investing deeply to become an "AI-first organisation." Through its 'Analytics 2.0' initiative, SBI is embedding AI across its entire value chain, moving towards a data-driven operating model. Chairman CS Setty confirmed that SBI, an early adopter of conventional AI for personal loan disbursements and money laundering monitoring, is now preparing for the adoption of generative AI (gen-AI) and agentic AI. Several use cases leveraging these advanced capabilities are expected within the current financial year. Setty also emphasized the bank's priority on AI and cybersecurity, establishing a dedicated cybersecurity center of excellence.
Bank of India's Project Aditya Expands AI Use Cases
Bank of India is internally running 'Project Aditya,' which has already implemented 31-32 AI use cases across various segments. These include business underwriting, collections monitoring, and customer onboarding. The bank aims to expand these AI applications to 50 within the current financial year. Rajiv Mishra, Executive Director at Bank of India, explained that AI is being utilized in processing capabilities, loan journeys, and collection management. Notably, the bank employs a "mule hunter" AI tool to detect fraudulent mule accounts, significantly enhancing fraud prevention.
Bank of Baroda Enhances Customer Service and Fraud Management
Bank of Baroda is also extensively deploying AI tools, particularly in fraud risk management. MD and CEO Debadatta Chand noted the significant value derived from backend AI applications. The bank is also directly deploying AI at the customer front, recently introducing an AI-powered communication tool. This innovative tool allows customers and employees to interact seamlessly, regardless of the language spoken, bridging communication gaps and improving service efficiency.
Regulatory Scrutiny and Cybersecurity Concerns
While AI offers immense benefits, it also presents growing cybersecurity risks. The emergence of advanced AI models like Anthropic’s Claude Mythos, which reportedly can analyze and exploit software vulnerabilities, has raised concerns globally. India's Finance Minister Nirmala Sitharaman has met with top banks to address these challenges. The capital markets regulator, Sebi, has established an AI task force to examine cybersecurity risks and devise mitigation strategies. The Reserve Bank of India (RBI) is also engaging with global regulators and banks to understand and manage potential risks. SBI's Setty acknowledged that new AI models highlight the increasing sophistication of threats, placing the Indian banking system on heightened alert. The industry, government, and regulators are collaborating closely to develop a coordinated cyber-resilience framework.