RBI Governor Urges AI Adoption and Foreign Deposit Growth

Reserve Bank of India Governor Sanjay Malhotra convened half-yearly meetings in Mumbai on July 14 with the leadership of public and private sector banks to address operational efficiencies and liquidity challenges. He urged lenders to leverage artificial intelligence and advanced technologies to reduce costs and expand services, provided these tools are paired with robust cybersecurity frameworks to protect customer data.

A primary focus of the discussions was the slow mobilization of foreign currency non-resident bank (FCNR-B) deposits. Despite interest rates rising to 6-6.5 percent, inflows reached only an estimated $6 billion to $8 billion, significantly missing the $50 billion expectation. Bank executives attributed this shortfall to high global funding costs and withholding taxes in Singapore and the United States.

To combat digital fraud, the central bank discussed implementing threshold-based delays for high-value transfers and utilizing the MuleHunter fraud detection system to stop the use of mule accounts. Malhotra also advocated for a shift from financial inclusion to financial expansion, suggesting increased credit for retail borrowers and MSMEs, and a potential increase in the ₹2 lakh threshold for gold loans. Other initiatives discussed included the Central Bank Digital Currency and the Unified Lending Interface.