India’s central bank proposes AI, blockchain adoption for banking sector

• The deputy governor of the RBI suggested that the country’s banks should use AI and blockchain technologies.
• The move comes against the backdrop of the Indian government’s ambiguous stance on cryptocurrencies.

A top official from India’s central bank has suggested that the country’s banking institutions use artificial intelligence (AI) and blockchain technologies to ensure growth and stability.

Deputy Governor Mahesh Kumar Jain spoke about risk management techniques for long-term growth and stability at a seminar for directors of Indian banks organized by the Reserve Bank of India (RBI).

Jain discussed the necessity of strong corporate governance, governance structure and risk management systems in the future. He said that radical advances at the moment include technological progress, increasing consumer demands and crypto-related risks.

The Vice-Centre added that other factors have presented a number of new risks that could be harmful to banking institutions that use technology.

He also said that there is a need for more exclusive innovations that can be useful in dealing with the financial industry’s new and serious problems.

He stated that,

“To prepare for the future, Indian banks will need to focus on digital transformation, improve customer experience, adopt innovative technologies such as AI and blockchain, invest in cyber security measures, look for opportunities to achieve synergistic benefits through collaboration with other players as well as upskilling of workforce to meet the demands of the digital era.”

India’s ambiguous stance on cryptocurrencies

The comments came against the backdrop of the Indian government’s ambiguous stance on cryptocurrencies.

India introduced the Cryptocurrency and Regulation of Official Digital Currency Bill, 2021 in the Lok Sabha, the lower house of Parliament.

The bill was designed to lay the foundation for the introduction of digital currency issued by the RBI. But it could not be legislated.

In India, there is no central authority that regulates cryptocurrency as a means of payment. There are no norms and regulations, nor are there any standards for solving problems while dealing with cryptocurrency.

India’s finance minister proposed taxing digital assets, escalating the dispute over the legality of cryptocurrencies in the country. The government announced a 30% tax on cryptocurrency gains in the recent Union Budget 2022.

Many have welcomed the decision to tax virtual money as the first step towards recognizing it. However, the government is yet to make an official statement on whether currencies like Bitcoin are legal in India.

India launched its central bank digital currency (CBDC) on a pilot basis for wholesale and retail segments in November 2022. And started testing its offline functionality in March this year.

RBI Managing Director Ajay Kumar Choudhary shared India’s intention to use CBDC as a medium of exchange.