Global funds turn wary of Indian stocks as AI boom draws money elsewhere

Distinguished guests, banking professionals, technology leaders, policymakers, media representatives, academics and colleagues from the Reserve Bank of India, good morning. I am honored to be back at the 2026 FIBAC conference, where esteemed banking and industry leaders gather to exchange ideas, drive innovation and enhance collaboration. I extend my gratitude to FICCI and IBA for organizing this event, and to the organizers for allowing me to share my insights today.

The conference theme of Artificial Intelligence (AI) is fitting and timely, as it will shape Indian banking in the coming decade, much like liberalization did for the 1990s and digitalization did for the 2010s. AI is not a single technology to be implemented, nor a completed project. Instead, it represents a new approach to conducting business and managing a bank, fundamentally altering risk evaluation, customer service, capital pricing and institutional organization.

Many banks in attendance are already utilizing AI, while others are contemplating its adoption. The critical question is whether we proactively shape AI's journey or allow it to dictate our actions. Before delving into AI, I would like to revisit a priority I discussed last year at FIBAC 2025. That year, I outlined three regulatory objectives: strengthening financial stability, enhancing ease of doing business, and expanding bank credit while reducing intermediation costs.

To achieve financial stability, we have implemented various measures, including the standardized credit risk capital approach, ECL framework, EIR changes in investment guidelines, prudential norms on project finance, related party transactions, dividends policy, NOP guidelines, among others. We are on track to implement all applicable Basel III guidelines by April 1, 2027, with a calibrated glide path. We have also strengthened regulatory oversight, particularly regarding technology risk.

In terms of enhancing ease of doing business, we have made significant progress by reducing regulatory burdens on boards, consolidating regulatory and supervisory instructions, streamlining business forms, enhancing PRAVAAH, harmonizing control and assurance functions, rationalizing current account and working capital norms, and delegating foreign exchange approvals to authorized dealers.

To expand bank credit, we continue to develop public digital infrastructure like the Account Aggregator ecosystem and the Unified Lending Interface, which lower the cost of originating and underwriting credit, especially for MSMEs and underserved borrowers. We are also streamlining regulations related to PSL, project finance, Alternative Investment Funds (AIFs) and acquisition finance, enhancing credit flow to deserving sectors.

Measures such as removing the Investment Fluctuation Reserve (IFR), revised interest rate norms on deposits, and rationalizing DICGC premium, LCR and CRR will reduce the cost of intermediation.