How state-owned banks are embracing AI

India’s state-owned banks are rapidly integrating artificial intelligence into core operations, driven by a survey from FICCI and the Indian Banks Association (IBA) identifying AI as the most transformative force in banking. State Bank of India (SBI), the country’s largest lender, is embedding AI across its value chain through its analytics 2.0 initiative. The bank plans to deploy generative AI (gen-AI) and agentic-AI use cases within the current financial year, expanding applications from personal loan disbursement to transaction monitoring and anti-money laundering. Bank of India is executing **Project Aditya**, with 31-32 AI use cases already in place—covering customer onboarding, loan processing, and fraud detection—aiming to reach 50 by the end of the fiscal year. Rajiv Mishra, executive director, highlighted AI tools like **‘mule hunter’**, which identifies suspicious accounts. Bank of Baroda is also leveraging AI for backend fraud risk management and frontline customer interactions, including a language-agnostic AI communication tool for seamless multilingual support. Regulatory concerns have grown over cybersecurity risks posed by advanced AI models like Anthropic’s **Claude Mythos**, which reportedly exploits software vulnerabilities. Finance Minister Nirmala Sitharaman convened a meeting with banks to address these challenges, while Sebi established a task force to devise mitigation strategies. The Reserve Bank of India (RBI) is collaborating with global regulators and banks to assess risks from such models. The shift reflects a broader industry trend, with AI streamlining operations, enhancing security, and improving customer experiences. However, the rise of powerful AI tools has intensified scrutiny over potential threats, prompting proactive measures from policymakers and financial institutions.