Key Points
Digital transformation crucial for financial institutions
AI and ML reshaping banking services
Technology must balance innovation with risk management
Customer-centric approach key to competitiveness
Addressing the Second Annual Conference on Macroeconomics, Banking, and Finance, jointly organized by the Indian Institute of Management Kozhikode (IIMK) and the National Stock Exchange (NSE) in Mumbai, Rao emphasized the importance of balancing innovation with risk management.
"To remain competitive, financial institutions must invest in digital infrastructure, and pivot to a customer-centric, data-driven approach in this new landscape," Rao said.
He highlighted that while technological advancements have brought immense benefits, financial institutions must be cautious about their dependence on third-party technology providers.
Ensuring regulatory compliance, cybersecurity, and customer protection should remain top priorities, he added.
"The challenge is ensuring a balanced and resilient financial ecosystem for the future. The key is to harness the benefits while managing the risks," Rao said.
Rao also pointed out that one of the most significant changes in modern finance has been the shift from cash-based and paper-driven transactions to a seamless, technology-driven system.
India has played a leading role in this transformation through innovations like the Unified Payments Interface (UPI), the Account Aggregator (AA) framework, and the recently launched Unified Lending Interface (ULI).
"These stand among the most transformative advancements of our times. This growing significance is reflected in how both financial institutions and regulators are increasingly engaging with AI-related topics," he said.
Looking ahead, Rao stressed that Artificial Intelligence (AI) and Machine Learning (ML) will play a key role in the next phase of financial transformation. He noted that these technologies are already reshaping banking and financial services, with their importance growing significantly in recent years.
He also stated that a study of the annual reports of Scheduled Commercial Banks shows a sharp increase in references to AI and its applications. This reflects the growing focus of financial institutions on leveraging AI-driven solutions.
With the rapid advancement of digital finance, institutions must continuously evolve, ensuring that they harness the benefits of technology while maintaining security and regulatory compliance.
