Fintechs & AI Risk: Sitharaman's Warning

Mumbai, Oct 7 (PTI) Finance Minister Nirmala Sitharaman on Tuesday asked fintech firms to focus on risk management at a time when criminals are using AI to mimic voices, clone identities and create lifelike videos to manipulate people.

Speaking at the 6th edition of Global Fintech Fest 2025 here, the finance minister also said India has the potential of becoming the global hub for building various AI products and services.

During the event, Sitharaman launched the Foreign Currency Settlement System (FCSS) of GIFT IFSC designed to settle transactions in foreign currencies on a real-time or near real-time basis.

With the operationalisation of the FCSS, GIFT IFSC joins a select group of global financial centres - including Hong Kong, Tokyo, and Manila - that have the infrastructure to settle foreign currency transactions locally.

The minister said India can also build AI products that fits diverse use-cases across the world. It can be a laboratory for developing and testing AI ideas.

"Our AI stack must be rooted in Indian languages, local contexts, and multimodal interfaces, so that it can be widely accepted and accessed by our citizens," she said and added that focused approach across the AI stack can make India the AI torchbearer for the Global South.

She said while artificial intelligence (AI) has transformed finance and governance, there are darker sides of the technology also.

"Even as AI opens extraordinary possibilities, we must confront its darker side. The same tools that power innovation can be weaponised for deception and for fraud. I'm not personalising it, but I can say, I have seen several deepfake videos of myself being circulated online, manipulated to mislead citizens and distort facts.

"It was a reminder of the urgency with which we must strengthen our defences," the finance minister said.

The new generation of fraud is no longer about breaching firewalls, it is about hacking trust, Sitharaman said.

Criminals, she added, are using AI to mimic voices, clone identities and create lifelike videos that can manipulate people.

The minister further said fintech in India is not a niche urban convenience, it is a nationwide enabler of economic empowerment. India's fintech journey has transformed everyday payments into an invisible and inseparable habit, powered by UPI and digital public infrastructure.

"This is a good moment to reflect on what kind of financial future we wish to build and how do we get there. Fintechs must essentially focus on the fundamentals such as revenue growth, innovative product offerings, profitability, risk and compliance capabilities," she said.

The minister emphasised that responsible regulation is not a brake on progress; it is a seat belt for safe acceleration.

Fintech sector must help cover the small remaining gaps in the financial ecosystem, she added.

In the span of a single decade, India has connected a population equivalent to that of the entire European Union (EU) to the formal banking system, opening over 56 Crore Jan Dhan bank accounts.

India now ranks 3rd in the world in terms of having the number of fintech companies and also leads in digital payment volumes, having processed over 18,580 crore UPI transactions worth Rs 261 lakh crore in 2024-25.

Nearly half the world's real-time digital transactions happen in India, with adoption rates of 87 per cent compared to a global average of 67 per cent, Sitharaman added.

She said the Government of India has leveraged digitisation by introducing Direct Benefit Transfer (DBT) system for the beneficiaries of all its social welfare schemes, which has significantly boosted welfare efficiency by reducing subsidies and leakages, with savings of Rs 4.31 lakh crore and a 16-fold increase in beneficiary coverage between 2014 and 2024.

Shift from paper-based disbursals to direct digital transfers has ensured that public funds reach the people they are meant for, she added.

The Union minister said given the large population with 650 million smartphone users, the country should create scalable models for sectors beyond finance such as healthcare, education, agriculture, MSMEs, exports, etc.

"India can also build AI products that fit diverse use-cases across the world. It can be a laboratory for developing and testing AI ideas," she said.

The AI stack must be rooted in Indian languages, local contexts, and multimodal interfaces, so that it can be widely accepted and accessed by our citizens.

Focused approach across the AI stack can make India the AI torchbearer for the Global South, the minister added.