Nirmala Sitharaman calls AI a double-edged sword, urges soft-touch regulation at Global Fintech Fest 2026

Finance Minister flags AI as double-edged sword for financial systems

Finance Minister Nirmala Sitharaman described AI as a double-edged sword that strengthens fraud detection while enabling sophisticated cyberattacks, speaking at the Global Fintech Fest 2026 held September 8-11 at Jio World Centre, Mumbai1

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. She warned that agentic AI risks amplifying operational and systemic risks as errors, fraud and market shocks could spread at machine speed when AI moves beyond recommendations to taking direct actions1

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. The minister emphasized that AI in financial systems helps spot fraud faster but simultaneously allows attackers to automate larger, more sophisticated attacks1

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. She stressed that responsibility for AI deployment cannot rest solely with technology teams, requiring boards, senior management and regulators to understand where AI is being deployed, what decisions it influences, and potential consequences if systems fail1

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Researcher resignation raises questions over AI safety safeguards

Sitharaman questioned whether AI safety safeguards being developed by frontier AI companies are keeping pace with rapid technological advancement, citing the recent resignation of Anthropic researcher Jacob Coxon2

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. Coxon, who worked on AI pretraining research at OpenAI and Anthropic, resigned warning that leading AI companies were racing towards self-improving superintelligence and gambling with human lives2

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. The Finance Minister noted that senior figures within the frontier AI ecosystem acknowledged the substance of Coxon's warning, giving weight to his concerns about commercial frontier labs racing straight to self-improving superintelligence2

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. She challenged the global AI industry to demonstrate that safeguards are actually keeping pace with development speed, warning that unless safeguards arrive quickly and update continuously, the question of AI going rogue is left for society at large to answer2

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Call for soft-touch regulation and responsible AI adoption

Nirmala Sitharaman urged regulators to explore soft-touch regulation for emerging technologies without constraining innovation, asking whether there's a way to regulate without affecting the innovative threshold1

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. She emphasized that responsible AI adoption is the real choice institutions face, not whether to adopt AI at all5

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. The minister warned that institutions relying entirely on legacy systems risk becoming less capable and losing out to competitors, stating that failing to adopt AI also carries risks5

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. She stressed that AI may assist judgment, but responsibility must remain human and institutional, with higher-risk applications requiring stronger review, explanation and appeal mechanisms1

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. The policy challenge, she noted, is building systems that are fast yet accountable, autonomous yet reversible, while maintaining consumer trust2

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Push for digital rupee advancement and regulatory coordination

Sitharaman urged the Reserve Bank of India to further advance both wholesale and retail CBDC pilots and continue sharpening its capabilities with the digital rupee as tokenization gains ground in financial markets1

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. She highlighted Rural Electrification Corporation Limited's tokenized bond pilot under SEBI's sandbox, where the bond and digital rupee settled simultaneously via RBI's CBDC4

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. The minister called for greater coordination among financial regulators, competition authorities, data protection authorities and cybersecurity agencies to ensure no activity escapes appropriate oversight merely because it sits at jurisdictional boundaries1

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. She emphasized that regulators, boards and senior management must know where AI is being used, what decisions it influences, what data it relies upon, and what harm could arise if it fails5

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Federated industry platform proposed for Indian tech sector

Nirmala Sitharaman proposed creating a federated industry platform that brings together the broader Indian technology ecosystem to give the sector a credible collective voice internationally4

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. Such a platform could engage foreign governments and regulators, work towards interoperable standards, share cybersecurity practices and help Indian companies navigate increasingly fragmented global regulations1

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. The minister noted that AI, fintech and digital platforms are borderless by nature, and a young startup cannot negotiate every national regulatory system alone4

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. She emphasized that technology companies must be fair to jurisdictions where they earn profits, meeting tax obligations in markets where they operate while contributing to societies and ecosystems supporting their growth3

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. The platform could support Indian companies by helping them understand regulatory requirements across markets, identify areas where standards can be made interoperable, and commercialize intellectual property for overseas market entry3

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. Sitharaman also released the flagship BCG report 'Balance: Thriving in the Age of AI', which outlines a blueprint for AI-native financial institutions with potential to reduce cost-to-serve by 30-40% and make over 400 million additional customers economically viable to serve4

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