State Bank of India Chairman C.S. Setty has warned that the growing use of artificial intelligence is creating new vulnerabilities for the banking sector. Speaking at FIBAC 2026, Setty said fraud could evolve faster than conventional banking systems are able to detect it. As banks increasingly adopt AI and more autonomous systems, they must strengthen cybersecurity while also reconsidering how technology risks are identified and managed.
According to Setty, the problem is that more sophisticated technology can produce more sophisticated cyber threats. AI can potentially help criminals develop faster and more adaptable fraud methods, making traditional, after-the-fact detection systems less effective. This creates a growing need for banks to anticipate threats rather than simply respond after fraudulent activity has already occurred.
The SBI chairman also emphasized the importance of governance, transparency, model risk management, and human oversight as AI systems become more autonomous. He argued that the level of scrutiny should depend on the consequences of a particular decision: the more significant the decision, the greater the need for explainability and human accountability. This is especially important in banking, where automated decisions can directly affect customers, credit, transactions, and financial security.
Ultimately, Setty's warning highlights a central challenge for AI-powered banking: maintaining trust while increasing automation. AI can improve fraud detection, lending decisions, customer service, and operational efficiency, but banks must ensure that defensive capabilities develop as quickly as offensive ones. The future of banking will therefore require not only advanced AI systems but also continuous monitoring, strong cybersecurity, transparent governance, and meaningful human control over consequential decisions.
